Private Equity Investments In Real Estate To Cross $4 Billion

Mumbai: Private equity inflows into the realty space may set a new milestone and exceed $4 billion this year, says a report. Most of this investments are into pre-leased office and retail assets, a major shift from residential sector, showing the low risk appetite of investors, says a Knight Frank report, adding over 80 per cent of PE capital so far this year are from long-term sovereign and pension funds.

The share of PE investments into residential projects nearly halved from 50 per cent in 2011 to 28 per cent in 2016 and further dropped to a meagre 4 per cent in 2017. Against this, the share of office market accounted for 29 per cent in 2011 now it stands at 66 per cent of the investments into in the real estate while that of retail climbed to 19 per cent in 2016 from almost nil in 2011 and is at 14 per cent till September this year.

Share of warehousing in total investments nearly doubled from 9 per cent in 2011 to 16 per cent in 2017. “Private equity investment is estimated to exceed $4 billion this year, well past the 2015 mark which was the highest since 2010,” says the report and noted that this is a welcome change as PE investments into the realty was stagnant between 2011 and 2014.

From an average investment of $2.1 billion in 2011 -14, capital flows rose by 57 per cent to an average of $3.3 billion between 2015 and mid-September this year. In 2017 so far, number of deals dwindled to 13, just over one-fourth of the tally in 2010. However, the average investments per deal increased 10-folds to $246 million per deal, thanks a major deal alone accounted for $1.8 billion.

Though most PE investors are domestic investors followed by investors from the US and Canada so far this year, Singapore had the highest investment per deal on account of a single big ticket GIC-DLF deal of $1,800 million this year.

In terms of inflows into major realty markets, Gurgaon tops with 56.4 per cent, thanks to the $1.8 billion DLF-GIC deal, followed by Mumbai with 39.8 per cent.