PE flows to realty may dry up; decline 78% in March quarter Life insurers to process Covid-19 death claims
In the wake of the global Covid-19 pandemic, private equity and venture capital inflows into the real estate sector has dropped 78 per cent in the March quarter and the deal numbers have declined 52 per cent. Going ahead, market watchers expect US-based PE firms, which were quite active in the Indian real estate market, to develop cold feet.
Real estate, especially commercial realty, has been witnessing significant growth in investments in the past few years. However, the sector received only $318 million in the March quarter against $1,490 million in the same quarter last year, a drop of 78.6 per cent, according to the data provided by EY to Financial Chronicle. The number of deals too came down to 11 from 23 a year ago.
Among the top deals, Goldman Sachs invested $85.54 million in Vatika Group and Blackstone invested $81.80 million in Golden Jubilee Hotels.
Going ahead, industry expects that even these investments will dry up, as US investors will hold back their India investment plans due to the epidemic. US investors accounted for a significant 36 per cent share in 2019, pumping in
$1.8 billion. Some of the large US investors like Blackstone, Hines, Warburg Pincus and Goldman Sachs have been active in the Indian realty market.
"Considering the rising pandemic in the US, there is high possibility that inflows will drop significantly in 2020, thus impacting overall inflows into the country," said Shobhit Agarwal, MD and CEO of Anarock Capital.
US-based firms pumped nearly $5.7 billion into Indian real estate between
2015 and 2019. US inflows rose from a mere $526 million in 2016 to over $1.8 billion in 2019.
With the total number of positive Covid-19 cases and death toll rising across India, life insurance companies stepped in on Monday to assure policyholders that they would not apply the clause of force majeure in case of Covid 19 death claims.
All life insurance companies, both public and private, are committed to process any death claim over Covid-19, the Life Insurance Council, an industry association, said, adding that the clause of 'force majeure' will not apply in case of Covid-19 death claims.
The force clause in an contract majeure insurance essentially releases both parties from obligation or liability when a circumstance beyond the parties' control occurs, preventing fulfilment of the contract.
"This step was taken to reassure customers who had reached out to individual life insurance companies seeking clarity on this clause in their contract as well as to dispel rumours to the contrar," the Life Insurance Council said.
"The life insurance industry is taking every measure to ensure that the disruption caused to policyholders due to the lockdown is minimal, by providing them uninterrupted support digitally,” said S.N. Bhattacharya, secretary general, Life Insurance Council.