PE inflows into office assets projected to jump 4-fold to Rs 24,000 cr in 2017: Cushman & Wakefield

By: | Published: April 3, 2017 2:07 PM

Inflows into commercial office assets in 2017 are projected to see a four-fold rise to Rs 240 bn (USD 3.5 bn), as per global real estate consultancy Cushman & Wakefield, as investors’ interest in leased office assets remains high.

Large project-level stake sales by developers such as DLF from Gurgaon, and Hiranandani and K. Raheja Corp from Mumbai will propel the overall inflows into the commercial office sector.

Noida: Inflows into commercial office assets in 2017 are projected to see a four-fold rise to Rs 240 bn (USD 3.5 bn), as per global real estate consultancy Cushman & Wakefield, as investors’ interest in leased office assets remains high. The year 2017 is likely to herald a new peak (overtaking 2014) for inflows into commercial office assets, aided by a few large office deals that are currently underway.

Large project-level stake sales by developers such as DLF from Gurgaon, and Hiranandani and K. Raheja Corp from Mumbai will propel the overall inflows into the commercial office sector. The next two years are likely to witness continued momentum of investments into the office sector as new investment-grade projects come into supply. Buoyed by stability in the commercial office sector, as well as the potential to list under REITs, investors have been keen to plough in funds in leased office assets.

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Reversing the general trend of residential investment surpassing commercial office sector inflows, the year 2017 will see inflows into the residential sector at Rs 116 bn (USD 1.7 bn), roughly half of the inflows that are expected in the commercial office sector. The expected total inflow this year into residential assets, therefore, is projected to be 44% lower than that of 2016. The momentum in the residential segment is expected to be slower as investors adopt a cautious stance towards the segment in light of the continuing subdued housing demand. Developers are taking up fewer new projects as they remain stressed by slower sales and changing regulations that will be brought in through setting up of the impending Real Estate Regulatory Authority (RERA) in each state this year.

Anshul Jain, Managing Director, India Cushman & Wakefield, said, “The recent efforts by the government to regulate the sector have been viewed favourably by investors. Moreover, the commercial office sector has been witnessing sustained high demand and investors are enthused by the opportunity in this space, led by impending REITs. Despite global economic concerns, lower GDP growth projection due to demonetization, and slower revenue growth forecasted in the IT-BPM sector, the office sector is seeing stable growth with adequate pre-commitments in key growth markets such as Bengaluru, Hyderabad and Noida. Besides the commercial office sector, we will also see investors’ appetite for retail assets increasing over the next few years.”

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PERE inflows in 2016 were seen at their highest in nine years at Rs 399 bn (USD 5.97 bn), registering a 26% increase from Rs 316.7 bn (USD 4.8 bn) in 2015. The number of deals closed during the year rose only 5% 119, while the average deal size increased from Rs 2.8 bn (USD 43 mn) in 2015 to Rs 3.4 bn (USD 50 mn), signaling increased confidence amongst investors to make larger investments into the Indian real estate sector.

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