PE in realty. PE investment flow to real estate more than $6.27 b in FY21

Anil Urs Updated - April 16, 2021 at 10:22 AM.

Average ticket size of PE deals rose by 62% to $178 million in FY21

Book with title private equity and calculator.

Despite Covid-19, private equity (PE) investments more than $6.27 billion were pumped into the real estate sector in FY21, as against $5.8 billion in FY20 — an increase of 19 per cent in one year.

According to the Anarock Capital’s ‘Flux – FY20-21 Market Monitor for Capital Flows’, the investment flow is the highest-ever PE investments since FY16 and unlike earlier, FY21 saw PE investors focus majorly on portfolio deals across multiple cities and assets, rather on specific projects or cities.

Such portfolio deals constituted 73 per cent of the overall share, with about $4,583 million invested via portfolio deals in multiple cities.

The average ticket size of PE deals rose by 62 per cent – from $110 million in FY20 to $178 million in FY21. Both structured debt and equity witnessed strong growth during the year at 84 per cent and 15 per cent, respectively.

Structured debt was largely towards portfolio deals instead of project-level assets.

Optimistic outlook

Though FY21 was an unprecedented year due to the pandemic, foreign PE funds showed much optimism for India. As much as 93 per cent of the total PE investments pumped into Indian real estate was by foreign investors.

In actual terms, investments by foreign PE funds almost doubled from $3 billion to $5.8 billion in FY21. In contrast, domestic PE funds invested merely $300 million compared to $420 million in FY20.

Shobhit Agarwal, MD & CEO – Anarock Capital, said: “Foreign funds are evidently very upbeat about India. High-grade rental-generating assets have attracted foreign investors in a big way during the year. Moreover, India has a strong underlying demand for office space with quality workforce and average rentals available at less than a dollar per square feet per month.”

“Alongside, the successful REIT listings have provided a good monetising option for PE investors, leading to a stronger demand for good quality rental earning office and retail assets,” he says.

“Good entry valuation coupled with the option to accumulate a healthy mix of portfolio assets have also driven this surge in foreign PE investments. During the year, PE funds like Blackstone and Brookfield have added a lot of assets to their existing portfolios, while others have takeover loan portfolios of NBFCs.”

Multiple asset classes

Among other significant trends, the share of asset classes like commercial, retail and hotel has been very good. While the asset class-wise bifurcation shows lower percentage, when considered along with portfolio deals (where bifurcation is not available), the share of these assets classes is strong.

Nearly 66 per cent of the total inflows ($6.27 billion) in FY21 was across portfolio deals in multiple asset classes. In contrast, in FY20, out of the total $5.28 billion total inflows, just 8 per cent of the total comprised portfolio deals.

Published on April 15, 2021 06:06