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PE investment in real estate records 98% QoQ rise in Q1 2022: Report

Since 2011 the real estate sector received cumulative PE investments of over $50 billion (50,809 million). Office remained the favoured asset class attracting $2,882 mn in CY 2021 while in Q1 2022 the sector attracted $732 mn.

The retail segment received investments worth $253 million in Q1 2022 that was led by a single deal.

The real estate sector in India received $1,180 million in Q1 2022, recording a growth of 98% quarter on quarter (QoQ) over Q4 2021, which had received PE investments of $597 mn. In the 2021 calendar year the total private equity investment (equity + debt) was recorded at $6,199 million, recording a rise of 57% YoY over 2020, according to Knight Frank India.

Since 2011 the real estate sector received cumulative PE investments of over $50 billion (50,809 million). Office remained the favoured asset class attracting $2,882 mn in CY 2021 while in Q1 2022 the sector attracted $732 mn. The real estate sector is expected to receive PE investments of an estimated $6.8 bn (6,884 mn) in the calendar year of 2022.

The office sector received 62% of the private equity investments in Q1 2022, followed by retail (21%), warehousing (10%) and residential (6%). From the perspective of annual numbers, the calendar year 2021 witnessed a surge of 57% to $6,199 million when compared to $3,945 million received in CY 2020. Office constituted 46% of the private equity investments in 2021, followed by warehousing (21%), residential (19%) and retail (13%). The number of deals went up from 20 in 2020 to 52 in 2021.

The way ahead: Outlook 2022

Knight Frank India estimates the capital markets to chart a growth of 11% YoY to $6,884 million in the CY 2022.

Commenting on the same, Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “While investors’ appetite remained strong across various real estate asset classes in 2021, escalating global tensions emanating from Russia-Ukraine war and the influence of omicron in the early part of the year were seen inhibiting investment. Moving forward, push for infrastructure spending will accelerate investments in the next 3 quarters of the year 2022 to levels witnessed prior to the pandemic with estimated investments touching $6.8 bn.”

Trends in PE investments in Office assets: The Most Favoured Segment

In 2021, the office real estate segment received investments worth $2,882 million from 14 deals, with total transactable area recorded at 35.4 mn sq ft. Approximately, 68% of the investments were in new development and under construction assets, unlike 86% in ready assets observed in 2016. The primary reason for this increase has been the lack of mature, transact-able assets in the Indian office market. Bengaluru and Hyderabad led the investment scenario due to development stage transactions by leading global funds.

In Q1 2022, the total area of office assets transacted stood at 36.9 mn sq ft, driven largely by one big deal between Mindspace REIT and Middle East sovereign fund Abu Dhabi Investment Authority (ADIA). The increase in transacted area hinted towards improving appetite among investors for bigger spaces. The office assets recorded a transaction value of $732 million in Q1 2022 from 3 deals.

The sector has received investments worth $817 million in 2021 which is up by 271% YoY despite the COVID threat. PE investments in retail remained concentrated with two major deals in 2021: an investment by Blackstone in Prestige’s retail assets, and an investment by GIC and Canada Pension Plan Investment Board in Phoenix Mills.

The retail segment received investments worth $253 million in Q1 2022 that was led by a single deal. The total area of retail assets transacted in Q1 2022 was recorded to be 1.7 mn sq ft. The Abu Dhabi Investment Authority-backed Lake Shore India Advisory bought Viviana Mall in Thane from Singapore’s Sovereign Wealth Fund GIC, and realty developer Ashwin Sheth Group.

The retail sector is expected to observe capital commitments from investment platforms that remain bullish on its growth prospects, eyeing retail sales buoyancy arising from prolonged pandemic stress.

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