By Shobhit Agarwal, MD & CEO - ANAROCK Capital
Indian real estate attracted nearly USD 14
bn of foreign private equity (PE) between 2015 and Q3 2019, says
latest ANAROCK data. 63% (approx. USD 8.8 bn) of the total foreign
investments backed commercial real estate. The residential sector
attracted just USD 1.5 bn of foreign PE in the same period,
trailing behind even the retail sector which saw cumulative inflows of USD
1.7 bn.
In stark contrast, domestic PE funds pumped
nearly USD 2.4 bn into Indian real estate since 2015, of which
nearly 71% (approx. USD 1.7 bn) went to the housing sector. This
was a period of considerable stress for the residential segment; domestic funds
invested heavily into a sector plagued by issues like delayed/stalled units,
low sales and fairly lower yields. This made exiting investments with substantial
gains difficult.
The commercial real estate segment, on the
other hand, delivered a comparatively stellar performance in the last five
years. Steady demand and rising rentals gave foreign investors a decisive edge.
Moreover, the overwhelming response to Embassy Office Parks’ REIT launch - and
its superlative performance - saw commercial real estate segment emerge as the
bigger draw for investors. Several other large developers are also keen on
listing their commercial assets under REITs.
An additional infusion of USD 1.6 bn between 2015
and Q3 2019 was a mix of foreign private equity and funding by Indian
developers or investors who collaborated either at project or entity levels.
For instance, in 2018, Canada’s CPPIB and India’s Phoenix Group together
invested nearly USD 100 mn into a mall project in Bangalore.
Domestic vs Foreign PE Funds
Crystal-gazing Future PE Trends
Indian commercial real estate will continue to
attract PE funds as there is high demand for Grade A office spaces across the
top Indian cities. Earlier data indicated that the first three quarters of 2019
alone saw inflows of USD 3 bn in the commercial segment - an increase of 43%
over the corresponding period in 2018.
Logistics, warehousing and retail will continue to
witness considerable growth on the back of recently-eased policy norms for the
retail sector, aimed at boosting growth and attracting more investments.
Over the short-to-mid-terms, the housing sector - which
has the greatest need for liquidity infusions - will retain its 'poor cousin'
status and garner much more gradual attention from wary investors. Though the
FM recently unleashed an alternative investment fund (AIF) of INR 25,000 crore
to revive languishing housing projects across the country, investors will watch
for actual implementation and deployment.
ANAROCK Capital data indicates:
15 May 2019
11 Jul 2019
23 Aug 2019
14 Sep 2019
16 Sep 2019
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