PE Investment Trends in India’s Realty Sector: CBRE
JOURNAL OF ACCOMMODATION TIMES INSTITUTE OF REAL ESTATE MANAGEMENT
Transactions in India’s real estate space might have slowed down over the last two quarters, but the sector has not been overwhelmed by the state of the wider economy. Despite the subdued pre-election economic scenario, in fact, the period observed an increase in private equity activity. Most investments by PE groups were structured debt deals and their preference was for residential projects or well-leased commercial projects. Investors spotted opportunity in fully leased IT parks and SEZs in cities such as Bangalore, Pune and Gurgaon. Land and/or development sites for residential and mixed-use development in the peripheral locations of leading cities also attracted investor attention. Blackstone was among the most active PE players in the country in 2013; and other significant players included the Xander Group and Red Fort Capital.
One of the most significant deals last year saw Blackstone investing approximately Rs. 450 crore for a 50% stake in Panchshil Realty’s SEZ project, Eon Free Zone (leased asset) at Kharadi, Pune. Last year also saw IDFC’s real estate investments arm buying out a constructed and leased phase (Phase I) of Pune-based developer, Paranjape Schemes’ SEZ at Hinjewadi, Pune, for INR 460 crore. More recently, Xander hiked its holding in the Tata Group’s public listed retail company, Trent Ltd., and acquired an additional 3% stake for about Rs. 107.4 crore. Meanwhile, the Canada Pension Plan Investment Board ( CPPIB) has also announced its intentions to invest in the Indian market; and Piramal Enterprises Ltd. has formed a strategic alliance with CPPIB for providing project-level debt to local developers across the Delhi NCR, Mumbai, Bangalore, Pune and Chennai markets.
According to CBRE’s recently released Asia Pacific Investor Intentions Survey 2014, which gauges the appetite and outlook of Asia Pacific real estate investors for the rest of the year, a significant majority of investors expect to commit more capital into the Asia Pacific real estate market in 2014 over that in 2013. The Survey 2014 identifies India as one of the priority markets for global real estate investors, particularly among Asian investors. India ranked as the fifth-most attractive investment destination in the APAC region, behind China, Australia and Japan, with long- term growth factors such as the demographic dividend, and rising middle class shielding it from the ongoing volatility in financial markets. The intention toinvest in India, therefore, exists; but actual deployment of capital has unfortunately lagged behind (according to the Survey 2014).