Realty private equity investments peaked in 2015
Total inflows in the real estate sector peaked during 2015 at ₹ 25,680 crore as per global real estate consultancy Cushman & Wakefield’s latest report on private equity i nvestments i n real estate (PERE). Private equity investments were higher by 72% from the previous year and highest since 2008. The substantial increase in PERE investments during the year was led by a three-fold jump in investments made in the residential sector.
The total number of deals also witnessed an increase during 2015 to 90 from 75 in the previous year. This was the highest number of deals closed in a year since 2008. In addition, the average deal size too increased and was noted at ₹ 290 crore, an increase of 43% on year-on-year basis.
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.
The total value of investments in the residential sector was noted at ₹ 18,070 crore. PE funds continue to make majority of the investments in the residential sector at the project level.
Investments in the residential sector have come at a time when residential sales have been sluggish for the last two years, leading to growing inventory levels. Residential sales are expected to see green shoots in 2016, owing to falling interest rates regime on home loans and rising income levels.
The total investment in commercial office assets was recorded at ₹ 5,420 crore, a decline of 28% from record high investments witnessed in the previous year.
Interestingly, all investments in the office sector during 2015 were made in leased assets. Nearly one-third (31%) of the total investments made in commercial office assets during 2015 Total inflows in the real estate sector peaked during 2015 at ₹25,680 crore Private equity investments were higher by 72% from the previous year and highest since 2008
The total number of deals also witnessed an increase during 2015 to 90 from 75 in the previous year In addition, the average deal size too increased and was noted at ₹290 crore, an increase of 43% on yearon-year basis
were concentrated in Mumbai. Chennai followed Mumbai with second highest share (25%) and surprisingly has outpaced other preferred markets like DelhiNCR and Bengaluru, primarily owing to one large deal.
Commenting on the report, Sanjay Dutt, executive managing director South Asia, Cushman & Wakefield, says, “The Indian economy is expected to attract higher foreign investments, owing to improved macro- economic conditions (higher GDP growth, controlled twin deficits and inflation) which is the result of an enabling policy environment created by the Central government in co-ordination with the RBI through structural reforms over the past 18 months.”
“This is reflected in the way PE funds have showed their renewed optimism and confidence in the Indian real estate sector by making record investments during 2015, especially in the residential sector despite sluggish sales and piling inventory levels across cities,” says Dutt.
“However, gl obal f unds have been selective and have invested through this route only with companies which have good credentials and a proven track record,” he adds. Mumbai attracted the highest share (34%) of total investment volume in 2015 with investments of ₹ 8,830 crore.