PE investment in real estate up 3% at Rs 43,704 cr during 2019: Report

Private equity investments into the real estate sector recorded a 3 percent YoY increase to touch Rs 43,704 crore in 2019 with office segment accounting for almost half of the share in investment flows, according to an analysis by Cushman & Wakefield India.

The office segment attracted Rs 21,890 crore from institutional investors in 2019, accounting for a 50.1 percent share of total investments in 2019. Foreign investors made up a significant share of 72.9 percent of overall investment inflows during 2019. Equity capital infusion formed 80.5 percent of the total investment inflows during 2019, up from a 64 percent share in 2018, the report said.

The continuing stress in the domestic PE market saw investments in residential segment decline for the third consecutive year to stand at Rs 7,457 crore for 2019, marking a 22.3 percent y-o-y decline, the report said

However, PE investment in retail and warehousing segments increased during last year. Investments in the retail segment increased by a multiple of 2.8X with recorded investments of Rs 5,500 crore  in 2019.

"Healthy consumption demand and favorable demographics are major drivers of investments in this asset class in both Tier-I & II cities," the report said.

Warehousing  and Logistics accounted for an 8.7 percent share in 2019 annual investments, with Rs 3,810 crore invested during the year. This segment is undergoing a significant evolution with entry of organised players and rising institutionalisation from being highly fragmented and unorganized in the past, the report said.
The absolute number of investment deals were lower by 17 percent YoY, pointing towards an increase in ticket size per deal and a spike in large- sized transactions during the year. Office sector investments dominated investment activity in 2019, like the previous year.

"The PE activity observed in 2019, with volumes touching Rs 437 bn in comparison to Rs 424.4 bn in 2018 , confirms the confidence of institutional investors in the Indian real estate market. With strong demand in the commercial segment, investor interest has remained robust in this asset class, for core and build-to-core opportunities, despite the tepidness in the residential sector. We expect investment volumes to remain healthy on account of anticipated deployment of fund commitments that have been made across the office and warehousing/logistics platforms. In addition, strategic investments in alternative segments like co-living/student housing, co-working, and data centers are likely to garner active interest from institutional investors," said Anshul Jain, Country Head & Managing Director, India.