India realty attracted nearly $14 billion foreign PE in 5 years: Anarock

The country’s real estate attracted nearly $14 billion of foreign private equity (PE) between 2015 and Q3 2019, according to Anarock.

Sixty per cent ($8.8 billion ) of the total foreign investments backed the commercial real estate. The residential sector attracted just $1.5 billion of foreign PE in the same period, trailing behind even the retail sector which saw cumulative inflows of $1.7 billion.

In stark contrast, domestic PE funds pumped nearly $2.4 billion into Indian real estate since 2015, of which nearly 71 per cent ($1.7 billion) went to the housing sector. This was a period of considerable stress for the residential segment; domestic funds invested heavily into a sector plagued by issues like delayed/stalled units, low sales and fairly lower yields. This made exiting investments with substantial gains difficult, according to Shobhit Agarwal, MD and CEO, Anarock Capital.

The commercial real estate segment, on the other hand, delivered a comparatively stellar performance in the last five years. Steady demand and rising rentals gave foreign investors a decisive edge. Moreover, the overwhelming response to Embassy Office Parks’ REIT launch saw commercial real estate segment emerge as the bigger draw for investors. Several other large developers are also keen on listing their commercial assets under REITs.

An additional infusion of $1.6 billion between 2015 and Q3 2019 was a mix of foreign private equity and funding by Indian developers or investors who collaborated either at project or entity levels. For instance, in 2018, Canada’s CPPIB and India’s Phoenix Group together invested nearly $100 million into a mall project in Bangalore.

Of the total $14 billion foreign investments in Indian real estate between 2015 and Q3 2019, nearly $8.8 billion went into commercial realty, followed by $1.7 billion in the retail sector and $1.5 billion into the housing sector. Logistics & warehousing drew over $1 billion, and the remaining investments went into mixed-use developments.

The top five foreign investors –Blackstone, Brookfield, GIC, Ascendas and Xander – alone contributed 75 per cent of the overall $14 billion into Indian real estate.

The top five domestic funds – Motilal Oswal, HDFC Venture, Kotak Realty, ASK Group and Aditya Birla PE – invested nearly 54 per cent ($1.3 billion) into real estate with focus on the top seven cities.

Indian commercial real estate will continue to attract PE funds as there is high demand for Grade A office spaces across the top cities. Logistics, warehousing and retail will continue to witness considerable growth on the back of recently-eased policy norms for the retail sector, aimed at boosting growth and attracting more investments.

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