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The country’s real estate sector has attracted private equity investments to the tune of ₹5,168 crore in the first quarter of 2015. This is up 85 per cent from the ₹2,800 crore mopped up by the sector in the same quarter a year ago.
A report by real estate consultancy Cushman & Wakefield’s on private equity investments in real estate, however, said it was marginally lower by 5.6 per cent compared to the previous quarter. The report also said that the residential sector attracted the highest transaction volumes during the quarter with a 53 per cent share in total investment activity, followed by the commercial office sector, which had a 47 per cent share.
It also added that the increase in investments during Q1 2015 was due to improved market sentiments and higher investments in residential and commercial office assets, which increased by 158 per cent and 68 per cent, respectively, compared to Q1 2014.
Chennai biz attracts Chennai was the only city, which witnessed investments in the commercial office space in Q1 2015.
Leased office assets such as IT Parks and IT-SEZs are likely to gain significant interest from foreign investors, due to low risk owing to high occupancy levels along with stable rental yields and significant potential for capital value appreciation, the study said.
In addition, the introduction of REITs is likely to boost investments as investors now have an exit route. In Q1 2015, residential assets recorded the second-highest PE investments since 2008.
The total value of investments in the residential sector was 2.5 times more than in Q1 2014 and was recorded at ₹2,752 crore.
Amidst liquidity issues faced by residential developers due to subdued demand and restricted access to debt funding, PE funds have emerged as an important alternate source to meet the funding requirements.
Favourites — residential, lease Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said, “With improving macro-economic conditions, enabling policy environment, recovering demand, attractive valuations and increasing capital requirements of the Indian real estate sector, PE funds are likely to increase their investments in the next few years. Residential and leased office assets will remain favourites with PE funds as demand for funding remains strong in the residential projects.”
The total number of deals, however, fell to 16 in Q1 2015 against 18 in the same quarter a year ago. However, the average deal size more than doubled at ₹320 crore against ₹150 crore in Q1 2014.
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