Real estate private equity funds focusing on top cities in India
Real Estate

Real estate private equity funds focusing on top cities in India

Overall, the real-estate sector attracted over $ 4 billion of PE in 2018, a decline of 9 per cent against 2017, states an Anarock Capital report. The office segment accounted for a massive 70 per cent share of total institutional investments in 2018; retail came in a distant second with 7 per cent; and residential drew the least PE among the three sectors, with less than 7 per cent.

PE funds are focusing on top cities because of their business in real estate, says Ashutosh Limaye, Director & Head - Consulting Services, Anarock Property Consultants. “In terms of asset class, they prefer income-producing assets, which is largely offices and, to some extent, shopping malls.”

Notably, Singapore funds, over two years, comprise a 41 per cent share of total PE inflows into Indian realty at $ 3.5 billion, as per Anarock. US and Canada-based PE investors come next with $ 3.8 billion PE funds collectively in the past two years.

Interestingly, the top five deals in 2018—all commercial—alone contributed almost 50 per cent of total investments during the year. (See table below.) Besides, 2018 witnessed the largest PE exit in Indian real estate when RMZ bought back 45 per cent shares of the holding company RMZ Infotech from QIA and Baring Private Equity Partners for about $ 1 billion.

Commercial drawing lion’s share

Commercial real estate drew PE funds of $ 2.8 billion in 2018 against $ 2.2 billion in 2017. According to Anarock, high occupancy levels, relatively lower rentals in dollar terms, quality Grade-A assets and high-quality tenants are responsible for commercial drawing the lion’s share of PE investments.

Meanwhile, the launch of India's first REIT, backed by PE giant Blackstone Group and Embassy Property Developments, is a positive move. In fact, despite a decline of 9 per cent in PE inflows in 2018 against the preceding year, 2019 is expected to see an increase in PE funding because of India’s first REIT listing. The bullish sentiment of institutional and retail investors is expected to build confidence among global PE investors, besides laying the path for more REITs to follow. At least five realty players—RMZ Group, K Raheja Corp, Brookfield, Panchshil Realty and Godrej Properties—are reportedly planning to raise $ 10 billion via REITs over the next two years.

South India steals the show

India’s southern region recorded the largest quantum of investment with maximum PE deals: a 47 per cent share of total PE investment in 2018. At the city level, Mumbai continued to be the most preferred destination, with 38 per cent of the total capital inflow. Hyderabad came in second, attracting over $ 1.1 billion of PE, contributing more than half the investments received by the South. The growth was largely led by the commercial space, where Phoenix Group received PE funds through multiple deals.

Overall, the real-estate sector attracted over $ 4 billion of PE in 2018, a decline of 9 per cent against 2017, states an Anarock Capital report. The office segment accounted for a massive 70 per cent share of total institutional investments in 2018; retail came in a distant second with 7 per cent; and residential drew the least PE among the three sectors, with less than 7 per cent. PE funds are focusing on top cities because of their business in real estate, says Ashutosh Limaye, Director & Head - Consulting Services, Anarock Property Consultants. “In terms of asset class, they prefer income-producing assets, which is largely offices and, to some extent, shopping malls.” Notably, Singapore funds, over two years, comprise a 41 per cent share of total PE inflows into Indian realty at $ 3.5 billion, as per Anarock. US and Canada-based PE investors come next with $ 3.8 billion PE funds collectively in the past two years. Interestingly, the top five deals in 2018—all commercial—alone contributed almost 50 per cent of total investments during the year. (See table below.) Besides, 2018 witnessed the largest PE exit in Indian real estate when RMZ bought back 45 per cent shares of the holding company RMZ Infotech from QIA and Baring Private Equity Partners for about $ 1 billion.Commercial drawing lion’s shareCommercial real estate drew PE funds of $ 2.8 billion in 2018 against $ 2.2 billion in 2017. According to Anarock, high occupancy levels, relatively lower rentals in dollar terms, quality Grade-A assets and high-quality tenants are responsible for commercial drawing the lion’s share of PE investments.Meanwhile, the launch of India's first REIT, backed by PE giant Blackstone Group and Embassy Property Developments, is a positive move. In fact, despite a decline of 9 per cent in PE inflows in 2018 against the preceding year, 2019 is expected to see an increase in PE funding because of India’s first REIT listing. The bullish sentiment of institutional and retail investors is expected to build confidence among global PE investors, besides laying the path for more REITs to follow. At least five realty players—RMZ Group, K Raheja Corp, Brookfield, Panchshil Realty and Godrej Properties—are reportedly planning to raise $ 10 billion via REITs over the next two years.South India steals the showIndia’s southern region recorded the largest quantum of investment with maximum PE deals: a 47 per cent share of total PE investment in 2018. At the city level, Mumbai continued to be the most preferred destination, with 38 per cent of the total capital inflow. Hyderabad came in second, attracting over $ 1.1 billion of PE, contributing more than half the investments received by the South. The growth was largely led by the commercial space, where Phoenix Group received PE funds through multiple deals.

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