Real Estate PE Investment Rises

Indian Real Estate segment has witnessed a slump over last few years but here comes the good news for the investors. According to recent reports, from January – September 2016, Indian Real Estate market has broken the norms of stagnation and mentioned a significant boost with attracting an increase of 22 per cent in private equity (PE) investment. This means, the Real Estate sector has managed to regain the investors interest resulting.

According to a report, PE investment in this segment has gone up to Rs. 28,300 crores, which was mere Rs. 23,200 crores a year ago. Within third quarter (July 2016- September2016) equity inflow has been increased by Rs. 9,200 crores which reflects a 3 per cent decline in the number of deals closed quarter-on-quarter (QOQ). Still, the total investment has shown a significant hike of 1.2 per cent reflecting investor’s confidence to make larger investments.

The average deal size has also been increased from QOQ, against a deal size of Rs. 275 crores Q2 2016; Q4 has observed a deal size of Rs. 287 crores. The year-over-year (YOY) change in real estate investment in office assets has marked a boost by 50 per cent, surpassing the total investment received during the financial year 2015. This reflects investors’ unceasing concentration on pre-leased office and commercial office assets.
Not just that, a significant hike is expected in terms of office portfolios investments and the few large deals are in the final phase for the fourth quarter (October – December 2016). As a result, this quarter is expected to mark a record as the highest annual investments in real estate made in the class of asset.

Even residential assets accessed 73 per cent of total investment for 3rd quarter with Rs. 6,675 crores. When compared to same period of 2015, investments in real estate, although, observed a moderate decline of 3 per cent, still it constitutes the largest share in total volumes for the current financial year.  While Delhi/NCR accounted for 18 per cent of the total share, Bengaluru accounts for 15%. Mumbai tops the charts with whooping 63 per cent and comes out as the most preferred location with the perspective of real estate investment.

While residential assets accounted 82 per cent of the total investment from the domestic funds, in the 3rd quarter the cumulative investment has mentioned a hike by 9% QOQ. These numbers, definitely, reflect the positive momentum of real estate revival resulting the investments in retail assets boosts up to threefold this year over last financial year. The Real Estate Investment Trust (REIT) attracting larger funds amounting to Rs. 1,020 crores over last year’s investments of merely Rs. 3,800 crores.

With opening the doors to the successful implementation of REITs in India, the Indian market is expected to draw more investments in real estate sector with the sturdy shift in ownership of assets from private help to institutionally held. This trend is in line with the global trends resulting albeit end of 2016 stronger and more promising.

With the decline in the number of launches in the residential asset segment, it is still continued to draw the highest volume of investments. The Retail segment shall be viewed with the caution as the real estate investments have been made in fully leased operational assets, boosting up the interest of investors.

In next 1-2 years, these trends are expected to see few more commitments.

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