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  1. Will $2.6-bn leg-up from PE funds fillip Indian real estate and bring dwindling sales back on track?

Will $2.6-bn leg-up from PE funds fillip Indian real estate and bring dwindling sales back on track?

The current worth of private equity inflow stands at $2.6 billion or Rs 16,530 crore, and it is only the first quarter of the year.

Published: May 17, 2018 6:19 PM
real estate in india, real estate investment,  PE funds, PE investment, policy reforms, real estate sales Residential assets are on the radar for many private equity firms, resulting in an influx of finance.

Indian real estate has entered a zeitgeist of reforms and policy updates that look to appease the market demographic, and make it a lucrative business sector for all concerned. In the list of good news pouring in the last few months, one of the key headlines is the sudden interest of institutional investors. Residential assets are on the radar for many private equity firms, resulting in an influx of finance. This has allowed the real estate sector in India to increase its value by a respectable 15% within the duration of a mere year. The current worth of private equity inflow stands at $2.6 billion or Rs 16,530 crore, and it is only the first quarter of the year. This spike in financial investment has surpassed any record of such kind in the last 10 years.

The residential real estate market had gained a lot of financial input from the PE firms. This was largely motivated by the latter’s desire to make the most of the profitable schemes offered by the government on real estate. In the concluding quarter, PE investment has doubled from $1.32 billion. A big portion of this cash boom was the deal struck between the Housing Development Financial Cooperation or HDFC, and the Abu Dhabi Investment Authority.

Mumbai saw the majority of the action, in the real estate sector, with about 19% of the total deals done in the residential sector, conducted over there. The sudden growth of interest in Indian real estate, by PE brands, only highlights how attractive the Indian market has become. Affordable housing projects are not only attracting the investors alone though, as buyers are also rushing to fill up the shortage of demand, in the last few seasons. Experts gather that the rest of the quarters are also poised to witness major activity resulting in ground-breaking deals that make the headlines. Private equities such as pension and sovereign funds are the major players in the game, currently.

The industrial real estate sector is also witnessing a major resurgence, with economic gains pouring in from FDIs in e-commerce, reforms owing to GST and even from the infrastructure status and logistics. The commercial or office sector witnessed financial investments cumulatively adding up to $.94 billion or Rs 6,100. This, however, is a drop in investment records, by a margin of almost 40%, since last year. This has been due to the unfortunate delay in certain deals between big-wigs in the sector. The country’s commercial office-space real estate sector is, however, still very much afloat, attracting foreign direct investment from investors looking to build up a modest portfolio, complete with valuable assets. This has altered the texture of ownership in the real estate market in major cities.

The tier-II cities are not far behind the curve, with investment occurring wherever quality real estate is attracting investors looking for value-for-money commercial space. This has led to development in cities like Bhubaneshwar, Coimbatore, Surat and more. Now with all the inflow of capital into the sector, the demand patterns in the coming months will give a clear sense of how much it is going to help in bringing the dwindling sales back on the track.

(By Honey Katiyal, Founder & CEO, Investors Clinic)

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