Global private equity eyes Indian real estate: report

Post-general elections with a stable federal government at work, global private equity (PE) players find real estate in India worth investing for good returns, an international realty services firm said Sunday.

“Global PE investment in India is likely to exceed Rs.12,000 crore ($2 billion) by end of this year, thanks to increasing interest globally in committing funds for the realty sector in the Indian sub-continent,” Cushman & Wakefield estimated in a report.

With big deals taking place in the commercial office space during second half of 2014, PE investments are expected to be about Rs.7,900 crore as against Rs.4,100 crore in the first half of this calendar year.

“Clarity in government process will be critical to the investment market. Recent announcements by the central government will spur investments into the sector,” said Cushman & Wakefield’s South Asia managing director Sanjay Dutt on the occasion.

As projects in the commercial office space are more economically viable, PE investments have been betting on them due to high occupancies and the trend is set to continue till year-end.

“PE funds are also being raised for residential projects as construction capital and leased office purchases, from high liquidity committed by domestic and offshore investors,” it said.

Many sovereign and pension funds are pumping funds into the Indian real estate like All Pensions Group (APG Group), Abu Dhabi Investment Authority (ADIA), Qatar Investment Authority (QIA), Canada Pension Plan Investment Board (CPPIB), State General Reserve Fund of Oman (SGRF) and GIC of Singapore.

Interestingly, Bangalore topped PE transactions in the first half of 2014 with Rs.2,500 crore Aas against just Rs.103 crore in the corresponding period year ago.

Investments were spread across the sector, with commercial office accounting for the major chunk (57 percent), followed by residential (28 percent) and retail (15 percent) asset classes.

Mumbai also saw healthy investments worth Rs.1,140 crore though largely in the residential sector.

PE investments in the country’s financial capital (Mumbai) shot up three times in first six months of this year over same period year ago, while transactions in NCR (national capital region) and Pune in Maharashtra were Rs.580 crore and Rs.167 crore.

PE investment (Rs.4,100 crore) in first half (January-June) was not only more than double of Rs.1,650 crore in same period of 2013, but also the highest since like period of 2009 when a whopping Rs.4,950 crore ($1 billion) was invested then.

Secondly, number of deals in first half of 2014 increased to 28 from 13 in same period of 2013, with the average deal size going up 16 percent to Rs. 146 crore.

Investment value in the residential segment at Rs.2,357 crore during first half constituted 60 percent of the overall investments, as PE funds are viewed favourably by developers.