Ministry of Statistics and Programme Implementation Infrastructure and Project Monitoring Division March 2020
India’s real-estate sector attracted investments worth $ 7.2 billion across 65 transactions in the past year, reveals a Vestian report. Foreign funds led the way, with the commercial segment securing a majority of private equity (PE) investments. According to a JLL study last December, the total inflow into Indian real estate in 2018 was about $ 5.5 billion. “And in the past 15 months, it would be about $ 6.7 billion,” shares Sonit Singh, COO & Head, Cross Border Capital Markets, JLL India. “The sector mostly attracted investments into rental yielding assets like office parks, malls, warehouses and co-working spaces,” says Vijay Agrawal, Advisor, Equirus Capital. He believes that warehousing and co-working spaces will be emerging areas of PE investment.
About 50 per cent of investments were in offices, amounting to about $ 2.8 billion of the $ 5.5 billion that came in last year. “These were primarily asset acquisitions or investment in the form of direct equity into the asset class,” says Singh. This was followed by warehousing, some hospitality and retail, and then residential, with momentum remaining strong in Q1.
While overall sentiments picked up in 2018, investors became more cautious and process-oriented, pushing some deals to 2019, observes Nikhil Bhatia, Managing Director & Co-Head, Capital Markets, CBRE India. The year also saw the majority of developers preferring an asset light business model, resulting in JVs as they require less capital outflow in the initial stages. “There is increasing preference for direct control over investments that are primary drivers for investment platform deals, which have seen tremendous growth from ~Rs 17.5 billion in 2012 to ~Rs 140 billion in 2018.”
The change in financing and the built environment has led to the re-emergence of capital solutioning through equity-like trades and project-level partnerships. “This mainly includes a mezzanine structure of financing, JV, joint development and development management (DM) by Tier-1 developers with landowners and Tier-2 and Tier-3 developers in key metros and micro markets,” explains Sanjeev Chandiramani, National Director - Capital Markets, Knight Frank (India). “Debt transaction with an equity upside or reduced preferred returns are the current flavour, as most investors are still risk-averse. Pure-play equity transactions are limited; more structured transactions are preferred.” Further, consolidation has led to the emergence of special situation funds, catering not just to last-mile financing requirements, financing projects with limited cover and cash flows, but projects with negative equity or delays in servicing owing to cost overruns or subdued sales velocity. Such funds, together with asset reconstruction companies, are playing a vital role in reviving key real-estate projects. The game-changer, though, is the listing of India’s first REIT, “where Blackstone not only got partial exit with upside on its long-term strategic investments, but we saw anchor investors like Morgan Stanley France, Fidelity, Wells Fargo, etc, on-boarding with a commitment of $ 2.5 million before listing and oversubscription by the retail segment for the same,” says Chandiramani. For CY2018, the investment is $ 6.7 billion, both in equity and debt forms of capital; this captures the capital allocation of both investors and developers. Are land deals fading? Few hands have exchanged land since January 2018, points out Chandiramani. “This is largely owing to potentially limited upside potential, high expectations of land owners, subdued sales velocity and statutory and compliance cost. Also, with limited capital availability, JV or development management opportunities are preferred over outright land transactions. Contrary to the expectations of policymakers and financial institutions, lack of land trades has not resulted in price corrections in land prices; prices are still holding stable with limited downward trend in the near future.”
In December 2018, Mapletree Investments acquired the securities of Faery Estates from SPREP, which owned SP Infocity, a Grade-A IT office development in Chennai, and renamed it ‘Global Infocity Park Chennai’—the largest acquisition made by Mapletree in India to date. “With a weighted average lease expiry of about 5.7 years, we are excited by the acquisition of this stable asset,” says Quek Kwang Meng, Mapletree’s Regional CEO, India. “The rebranding of the name better reflects the global nature of our tenant base, which includes financial institutions and consulting and technology firms.”
The total retail opportunity across various transport hubs in India, such as airports, highways and bus stations, metro, r.. February 2020