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PEs invest $1 billion in Indian real estate in January-March: Data


MUMBAI: Institutional investors’ appetite for Indian real estate, particularly the commercial segment, has maintained its robust momentum since one year.

Private equity (PE) investment in the sector has touched nearly $1billion during January-March, showed data from Anarock PropertyConsultants.

More than half the inflow came through a single deal — Brookfield Asset Management’s recent acquisition of Leela Ventures’ portfolio of hotel assets for $570 million. Long-term commitments with preferred developers accounted for another $500 million.

Real estate attracted over $4 billion of PE inflow in 2018, a decline of 9% on-year. In 2018, PE funding in the residential segment slipped to a four-year low of $266 million, an 82% drop since 2015, while the commercial segment recorded a four-year high of $2.8 billion.

“Currently, funding is a major hurdle for Indian real estate’s growth prospects, especially post the crisis with non-banking financial company (NBFC). PE is the best alternative for developers that qualify for it… 2019 will bring a marked increase in PE funding because of the listing of India’s first real estate investment trustNSE -0.07 % (REIT),” said Shobhit Agarwal, chief executive, Anarock Capital.

A stable fund flow is expected for the rest of the year on the back of the Blackstone-Embassy Group REIT creating an additional monetisation avenue for global institutional investors.

Agarwal reckons that commercial real estate — especially grade A office spaces — will attract considerable investment from here on. Much of the industry’s prospects also hinge on the outcome of the upcoming general elections. Institutional investors will continue to pump funds into real estate if they can rely on political stability, proactive policies and a favourable microeconomic environment.

The commercial office segment saw the highest inflows, accounting for 70% share of total institutional investments into the industry last year. Retail real estate came in a distant second, with 7%, and the residential sector drew the least PE of less than 7%.

According to the Anarock report, of the total PE of $14 billion into the sector in the past four years, 2017 and 2018 collectively account for $8.6 billion.

Despite deal numbers declining since 2015, the average deal size has increased nearly 172% in the past four years — from $47 million in 2015 to $128 million in 2018. Interestingly, the top 5 deals in 2018 alone contributed almost half of total investments during the year. PE investors are also more cautious now about selecting and associating with developers; however, once convinced, they are investing big.