Realty sector draws $1.18 billion private equity investments in Q1 2022

Global institutional investors' demand for Indian real estate continues to expand, despite the growing need for commercial and residential real estate and the sector's transition in terms of transparency, driven by regulatory changes.

According to Knight Frank India, private equity investments in real estate increased 98% sequentially to $1.18 billion in the March quarter and are likely to reach $6.88 billion by 2022.

Total private equity investment, including stock and debt, was $6.2 billion in 2021, up 57% from the previous year. Since 2011, the country's real estate market has garnered approximately $50 billion in private equity investments.

The office remained the most popular asset type, drawing $2.88 billion in 2021 and $732 million in the first quarter (Q1) of 2022.

During the quarter, the office sector attracted 62% of private equity investments, followed by retail (21%), warehousing (10%), and residential (6%).

In 2021, the office real estate industry got $2.88 billion in investments over 14 acquisitions, with a total transactable area of 35.4 million sq ft.

In 2016, 68% of investments were made in new development and under-construction assets, compared to 86% in ready assets.

The absence of mature, transactable assets in the Indian office market is the fundamental cause of this growth. Due to development stage transactions by top global companies, Bengaluru and Hyderabad led the investment scene.

The overall area of office properties transferred in the March quarter was 36.9 million sq ft, partly due to a significant agreement between Mindspace REIT and Abu Dhabi Investment Authority (ADIA), a Middle Eastern sovereign fund.

The increase in the transacted area suggested that investors' interest in larger places was improving. In the March quarter, three agreements totalled $732 million in value for the office properties.

In Q1, the retail category got $253 million in investments, driven by a single deal. The total area of retail properties traded in the March quarter was 1.7 million sq ft.

Lake Shore India Advisory, supported by the Abu Dhabi Investment Authority, purchased Thane's Viviana Mall from Singapore's Sovereign Wealth Fund GIC and realty developer Ashwin Sheth Group.

Capital commitments from investment platforms that remain positive on the retail sector's development prospects are projected, with retail sales buoyancy resulting from prolonged pandemic hardship.

Institutional investors were interested in the residential segment because of the pandemic-induced boost in momentum and the increased emphasis on house ownership. In 2021, the industry brought in $1.19 billion, a 223% increase.

The residential sector demonstrated its confidence by increasing risk capital/equity exposure to an all-time high of 81% in 2021. A single deal accounted for $73 million in residential investments in Q1 of 2022.

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