Indian realty private equity inflows $53 billion since 2008: Report

Written by April 3, 2019 17:22

Private equity inflows into Indian real estate have surpassed $53 billion or Rs 32,000 crore since 2008, with 59% of that total invested between 2014 and first quarter of 2019, showed data from Colliers research.

After 2014, a slew of reforms including enforcement of the Real Estate Regulatory Authority, introduction of the Goods and Services Tax and the Insolvency and Bankruptcy Code, and a relaxation of foreign direct investment norms, have steered investors’ interest towards Indian real estate.

“Investor-friendly reforms, positive sentiment following India’s first Real Estate Investment Trust (REIT) offering last month, and firm market fundamentals will continue to steer investments into commercial property assets. Investment in residential assets may be hampered due to the upcoming general elections and an ongoing crisis in the Non-Banking Financial Company (NBFC) industry”, said Joe Verghese, managing director at Colliers International India.

From 2014 to 2018, institutional investors invested in excess of $10 billion or Rs 7,000 crore in office assets. This is driven in part by strong commercial office leasing, which touched a new peak in 2018 at 50.2 million sq ft.

Investors are scouting for investment-ready assets in core office locations in Mumbai, Delhi-NCR, Bengaluru and Hyderabad, which together accounted for about 77% of the total leasing in 2018.

Colliers expects higher investor interest for greenfield projects in southern cities, especially Bengaluru and Hyderabad, which are witnessing pent-up demand in key office corridors.

Investors continue to view the residential segment favorably, buoyed by its low gestation period, as well as opportunity in affordable housing. However, Colliers expects slowing of investments into residential sector, largely due to the ongoing NBFC crisis in the country, and the upcoming general elections.

Investors’ sentiment towards Bengaluru has undergone a perceptible shift with the Silicon Valley of India emerging as the first preference for investment over the next 12 months. This is a departure from the past, when Mumbai and Delhi-NCR witnessed a high volume of investment.

Traditionally, Mumbai has received the highest inflows, accounting for 31% of total investments between 2008 and first quarter of 2019. Delhi-NCR garnered the second-largest share at 21% of total inflows in the same period.

Among the newer avenues for investment, about 63% of the investor respondents preferred data centers as their first choice. With some states like Maharashtra putting in place a Cloud Policy, we advise occupiers to scout for data center opportunities in Pune and Navi Mumbai, apart from IT centers like Bengaluru and Hyderabad.

Being a recession-resistant industry, student housing is emerging as an attractive option. With returns that can hover around 10%, we urge developers to expand in this fragmented space, making it more organized, thereby making it easier for investors to enter.

In the coming year, around 63% of the investors said they are likely to invest up to 20% of their investments in distressed assets.

While distressed assets are a good opportunity for investors to acquire assets below cost, it is often fraught with legal challenges in India, and therefore, can be a risky proposition.