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Indian real estate attracts $5 billion PE in 2019, commercial projects lead

MUMBAI: Indian commercial real estate retained its Numero Uno position and continued be a preferred destination for global institutional investors in the backdrop of robust office space take-up, falling vacancy levels and rising rentals.

Indian real estate attracted more than $5 billion private equity (PE) inflows in 2019. Of this, over 66% or $3.3 billion was infused in the commercial real estate. Meanwhile, both retail and residential segments saw an uptick in investments in 2019 against the preceding year, showed data from ANAROCK Property Consultants.

While the Mumbai Metropolitan Region (MMR) remained the most attractive investment destination for PE funds, it was the National Capital Region (NCR) that stood out in 2019. After Mumbai, the national capital region was the second-most attractive real estate destination for PE players. Together, the two mega regions received PE inflows of $2.7 billion - a 53% overall PE share - in Indian real estate in 2019 ..

“Total PE inflows in Indian real estate remained more or less the same in 2019 against 2018. However, NCR once again emerged as a major hotbed for private equity activity in 2019. Besides office real estate, the retail sector helped NCR gain traction from both foreign and domestic funds,” said Shobhit Agarwal, MD & CEO – ANAROCK Capital. “Residential saw some green shoots of revival in 2019 and this will continue in 2020 as the government’s distress funds are deployed.”

In sharp contrast to previous years, investors are now showing a keen interest in last-mile funding for stuck housing projects. This, along with the government support of Rs 25,000 crore for stressed projects, will go a long way in relieving residential real estate from its woes.

“Given the government’s involvement, last-mile funding is one of the most sought-after products now preferred by several lenders across geographies. Apart from low execution, land title and sales risk, the segment also stands apart due to faster return of the capital with higher than moderate returns,” said Subhash Udhwani, founder of real estate-focused boutique investment bank, Elysium Capital.

Notably in 2019, other than commercial real estate, retail segment also garnered considerable PE attention based on the high demand for organised retail spaces across the country. The retail sector was a major draw for PE funds during the year, receiving nearly $1 billion against $355 million in 2018, an annual rise of over 170%. Interestingly, the residential sector received relatively higher PE inflows of $395 million against $265 million a year ago.

Out of major markets, MMR with PE inflows of over $1.8 billion during the year witnessed a 19% on-year jump. NCR stood out with total inflows of over $845 million in 2019 from mere $195 million in 2018.

The Information Technology (IT) hubs of Pune and Bangalore attracted PE funds of around $390 million and $615 million respectively in 2019. Both cities saw inflows rise by 210% and 47%, respectively in a year. Hyderabad, the showstopper of 2018, attracted PE funds of just $440 million in 2019 against $1.1 billion a year ago. This drop was expected as 2018 was a one-hit wonder rather than a steady trend, experts said.

The high potential of logistics and warehousing notwithstanding, this segment attracted about $200 million in PE funds - a drop of nearly 50% against the previous year. Mixed-use developments saw inflows of around $155 million in 2019, as against $310 million a year ago.

Jan 08, 2020

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