Private equity investments in the real estate sector touched Rs 25,680 crore or $4 billion during 2015, the highest level seen since 2008, according to Cushman and Wakefield’s latest report.
PE investments were higher by 72% from the previous year. Interestingly, it was the residential sector that led majority of the surge. The residential sector attracted the highest share of investments during the year with over 70% share in total investment activity, followed by the commercial office sector, which garnered 21% share. This trend defies ground realities, in the sense that commercial real estate absorption hit an all time high with absorption of over 30 million sq ft during the year.
In sharp comparision, the residential segment continued to bleed under the pressure of unsold inventory and demand shrinkage. Experts said that private equity funds might have taken position in projects where they see future potential at a time when developers are undergoing a massive capital crunch. Among the micro markets, Mumbai attracted the highest share (34%) of total investment volume in 2015 with investments of R8,830 crore, nearly three times higher than the previous year. Although the growth in investments signify confidence in core fundamentals, “structured debt and not equity has been the preferred route of investment,” said Sanjay Dutt, MD of Cushman & Wakefield, India. The surge has also been led by domestic funds as global ones have been selective and only invested with companies with good credentials and proven track record, Dutt added.