MUMBAI: With several reforms and policy initiatives, Indian real estate’s attractiveness is growing multifold as indicated by the institutional investors’ rising appetite for this asset class. Private equity inflows into Indian real estate rose 15% from a year ago to $2.6 billion or Rs 16,530 crore during the first quarter, eclipsing the inflows of the first quarter of the previous 11 years, showed data from 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 from a year ago $1.32 billion or Rs 8,518 crore. This was driven by a large platform transaction between Housing Development Financial Corporation (HDFC) and Abu Dhabi Investment Authority (ADIA).
Mumbai, the country’s hottest property market, accounted for around 19% of the total deals in the residential sector.
“The strong inflow level is testimony to the attractiveness of the Indian real estate market for institutional investors. Affordable housing projects continue to see interest from institutional investors, driven by strong end-user demand and government incentives for both developers and homebuyers. We foresee inflows into this segment to be on the rise over the next few years,” said Anshul Jain, Country Head & Managing Director India, Cushman & Wakefield.
During the remaining part of this year, Jain believes the market is 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 & warehousing sector, backed by key economic reforms including the Goods & Services Tax (GST), infrastructure status to logistics, 100% FDI in e-commerce marketplace, is also emerging as a compelling opportunity for investors.
Office sector, recorded inflows of $0.94 billion or Rs 6,100 crore, which is a 40% decline from a year ago. The surprise decline in investments is due to postponement of 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 350 crore 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 $1.01 billion or Rs 6,535 crore during the year 2017.
Retail developments in tier-II cities have been attracting 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 250 crore. Over the last two years, investors have ploughed in funds in tier II cities like Coimbatore, Surat, Mohali, and Indore.
Mumbai witnessed the highest investments during the quarter with inflows of $0.97 billion or Rs 6330 crore, 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.