Private Equity (PE) investments in the Indian real estate have grown at a CAGR of 36 per cent from 2014 to ₹59,100 crore in 2017, bolstered by a reduction in investment risk perception and availability of matured assets, real estate consultant Knight Frank said on Thursday.

The average investment per deal increased almost 2.5 times from ₹270 crore in 2011 to ₹700 crore in 2017. In the first six months of 2018, ₹33,700 has been invested across 31 deals with an average investment per deal of $158 million.

‘Renewed interest’

This is almost four times the average investment per deal in 2011, Knight Frank said in the report on Realty Asset Monetisation 2018. “The real estate industry has been through a churn over the past few years due to a slew of structural reforms. This has led to a reduction in investment risk perception coupled with the availability of matured assets resulting in a record ₹57,300 crore PE investments in 2017 alone,” Shishir Baijal, Chairman and Managing Director, Knight Frank India, said. While PE investments into the residential sector languished, investors flocked to the commercial assets with inflow into office segment.

Commercial assets

“A closer look indicates that the once-overlooked segments of retail and warehouse have seen a renewed interest from global institutional investors,” he said.

Warehousing has seen an investment of ₹28,822 crore since 2011 while the number for retail is ₹10,362 crore. “Warehousing assets require very less amount of time, just around 12-18 months, to construct compared to office and retail assets. So 72 per cent of total investments was into greenfield projects,” the report said.

Global investors

As Indian real estate space is witnessing interest from global investors, several deals are facing challenges due to violation of construction norms in the assets.

These investors do not want to get associated with non-compliant assets where deals are stuck. “Fully-compliant assets are the need of the hour,” Knight Frank said.

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