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PE inflows in India real estate up 19% in FY21, investors eye portfolio deals across cities

Foreign PE investors contribute 93% of total PE inflows - investments by foreign funds almost doubled from $3 billion in FY20 to $5.8 billion in FY21.

The top 10 deals alone contributed nearly 78 percent of the total PE inflows in FY21(Representative image)

The top 10 deals alone contributed nearly 78 percent of the total PE inflows in FY21(Representative image)

Despite the COVID-19 pandemic, Indian real estate witnessed over $6.27 billion being pumped into the sector in FY21, as against $5.8 bn in FY20 - an increase of 19 percent in one year, a report by Anarock titled Flux – FY20-21 Market Monitor for Capital Flows has said.

Though FY21 was an unprecedented year due to the pandemic, foreign PE funds showed much optimism for India. As much as 93 percent 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, it said.

FY21 saw private equity investors focus majorly on portfolio deals across multiple cities and assets, rather on specific projects or cities. Such portfolio deals constituted 73 percent of the overall share, with approximately $4,583 million invested via portfolio deals in multiple cities, the report said.

The average ticket size of PE deals rose by 62 percent in the fiscal year – from $110 million in FY20 to $178 million in FY21. Both structured debt and equity witnessed strong growth during the year at 84 percent and 15 percent respectively. Structured debt was largely towards portfolio deals instead of project-level assets.

"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 sq. ft. per month,” said Shobhit Agarwal, MD & CEO - ANAROCK Capital.


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"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 said.

"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.”

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 asset classes is strong.

Nearly 66 percent of the total inflows ($6.27 bn) 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 percent of the total comprised portfolio deals.

The top 10 deals alone contributed nearly 78 percent of the total PE inflows in FY21 as against 67 percent in FY20. Also, among the foreign PE investors that remained major contributors for overall PE inflows in India, Canada and US-based investors pumped in more than 50 percent of the total foreign PE investments in FY21.

The industrial and logistics sector had strong investor support. Key emerging trends in this sector - rise of automation, urban multi-level warehousing, de-centralization, increasing business consolidation, and high demand for Grade A assets. Data centres are becoming the new sunrise sector, gaining more attention from PE investors and strategic investors, the report said.
Moneycontrol News
first published: Apr 15, 2021 12:01 pm

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