Private equity inflows into real estate rose 15 percent year-on-year to Rs 165.3 billion (USD 2.6 billion) during the first quarter, eclipsing the inflows of the first quarter of the previous 11 years, says global real estate consultancy Cushman & Wakefield. The residential sector gained prominence in inflows with the highest ever inflows in 10 quarters, as investors look to gain from government incentives in affordable housing.
During the quarter, private equity inflows into the residential sector more than doubled (year-on-year) to Rs 85.18 billion (USD 1.32 billion), backed by a large platform transaction between Housing Development Financial Corporation (HDFC) and Abu Dhabi Investment Authority (ADIA). Mumbai accounted for approximately 19 percent of the total deals in the residential sector.
Mumbai witnessed the highest investments during the quarter with inflows of Rs 63.3 billion (USD 947 million), primarily led by the office sector. The city also noted the largest investment transaction for the quarter, the stake acquisition by Blackstone in two office projects of Indiabulls Real Estate, says the report.
Office sector, recorded inflows of Rs 61 billion (USD 913 million), which is a 40 percent decline from the corresponding quarter last year. The decline in investments is due to the postponement of the closure of certain notable transactions to forthcoming quarters.
The country’s buoyant office sector continues to attract heightened interest from foreign investors who are building up a portfolio of rent-yielding assets and thereby altering the ownership pattern (between developers and private equity investors) of office stock in major cities.
The sunshine sector of Industrial & Warehousing received inflows of Rs 3.5 billion (USD 52 million) in a Logistics Park near Chennai as part of a platform formed between Ascendas-Singbridge and Firstspace Realty. The sector received a significant investment of INR 65.36 billion (USD 1.01 billion) during 2017, the report says.
Retail developments in Tier-II cities have been attracting the attention of investors due to the investment prospects in these cities backed by demand for space by retailers amidst lack of quality retail spaces. In continuation of this trend, Blackstone acquired a majority stake in Esplanade Mall, Bhubaneswar for Rs 2.5 billion (USD 0.04 billion). Over the last two years, investors have ploughed in funds in tier II cities like Coimbatore, Surat, Mohali, and Indore.
“The strong inflow level is a testimony to the attractiveness of the Indian real estate market for institutional investors. Affordable housing projects continues to see interest from institutional investors, driven by strong end-user demand and government incentives for both developers and home buyers. We foresee inflows into this segment to be on the rise over the next few years. During the remaining part of this year, we are also likely to witness some marquee deals in the office sector by private equity majors (including pension and sovereign funds), amidst strong leasing and limited availability of quality assets in core markets. The industrial and warehousing sector, backed by key economic reforms (GST, infrastructure status to logistics, 100% FDI in e-commerce marketplace) is also emerging as a compelling opportunity for investors,” says Anshul Jain, country head and managing director India, Cushman & Wakefield.