Realty private equity in­vest­ments peaked in 2015

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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.

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