Real estate sector drew $4.07 b PE in 2020

The Indian real estate sector raised about $4.07 billion in Private Equity (PE) funding across 21 deals in 2020, accounting for about 11 per cent of the total investments of $38.15 billion raised during the year.

The share of office PE investments rose to 62 per cent during the year from 24 per cent in 2011 and that of warehousing quadrupled to 24 per cent during the same period, according to a report by property consultant Knight Frank India.

“Despite a slowdown in overall PE investment, India continues to witness a strong investor appetite for rent yielding office assets. Knight Frank believes that with more clarity following the pandemic resolution and sense on structural changes, the deal activity is expected to pick up further in 2021,” Shishir Baijal, Chairman and Managing Director at Knight Frank India said.

Since 2011, the segment has garnered $16.21 billion of equity investments, and during 2020, the segment transacted seven deals amounting to $2.6 billion.

Around 21.8 million sq ft of the office assets were transacted.

The PE investments through equity route in this space were down 19 per cent Y-o-Y in 2020 compared to $3.09 billion during the same period of last year.

In 10 years, between January 2011 and December 2020, Mumbai took the largest quantum of office investment worth $5.29 billion followed by the National Capital Region with $2.80 billion and Hyderabad with $2.2 billion.

Warehousing sector

In 2020, the warehousing sector attracted PE investments through equity route worth $971 million, which were 49 per cent lower than $1.9 billion raised during the same period last year.

This drop can largely be attributed to a significant percentage of capital committed to the warehousing sector in India over the past three years awaiting deployment.

During the year, the residential sector witnessed seven deals worth $368 million, down by 49 per cent compared to $717 million in 2019. For several years residential prices have been stagnant and have even corrected at specific locations.

Though overall PE investment (debt and equity) in residential has come down in the past four years, investors’ risk appetite in residential has gone up as the share of equity investments has grown from 35 per cent in 2019 to 52 per cent in 2020.

In terms of investor origin split, the US leads the chart with $6.7 billion investment claiming 26 deals since 2011, followed by Singapore with $5.2 billion and Canada with $2.08 billion.

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