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COVID-19 impact | PE Inflows by US-based firms to decline in 2020, says ANAROCK

Of the total $5 billion PE inflows in Indian realty in 2019, US firms accounted for 36% share or around $1.8 billion.

With more 337,000 cases and over 9,600 deaths, the US is now the epicentre of the coronavirus outbreak, dealing a huge blow to its economy that may lead to a significant drop in funds coming into India, property consultant ANAROCK has said.

The US-based private equity (PE) players pumped nearly $5.7 billion into Indian real estate between 2015 to 2019, accounting for a nearly 29% overall share. On a year-on-year basis, PE inflows from the US increased from $526 million in 2016 to over $1.8 billion in 2019, ANAROCK said in a report released on April 6.

“… considering the rising pandemic fallout in the US, there is a high possibility that inflows will drop significantly in 2020, thus impacting overall inflows into the country,” ANAROCK Capital MD & CEO Shobhit Agarwal said.

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“India has been a major draw for US-based private equity players over the last few years. In 2019 alone, US-based firms comprised 36% share and pumped in ~ $1.8 billion out of the total $5 billion PE inflows in Indian realty.”

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Other prominent PE players investing in Indian real estate are based out of Singapore, Canada and UAE, among others.

Of the total $5.7 billion US PE funds, close to $3.5 bilion (61%) targeted commercial real estate. The retail real estate segment came next, attracting nearly $1 billion. Residential real estate drew close to $500 million and over $400 million targeted mixed-use developments. More than $300 million were pumped into the logistics and warehousing sectors, the report said.

Some of the cash-rich funds could also leverage the coronavirus fallout. As and when they enter India (probably in the second half of 2020), they will scout for good bargains and value-pick options on their own terms. Indian developers may see reduced valuations, the report said.

According to latest estimates, the coronavirus could lead to 13-30% drop in office space absorption against the previous years in the top seven cities.

This is because most multi-nationals and domestic businesses will re-strategise expansion plans and optimize operational costs in the wake of the pandemic. All these factors would inevitably impact the Indian investment plans of the US private equity majors as well, the report said.
Moneycontrol News
first published: Apr 6, 2020 04:31 pm

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