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PEs put in Rs 29,284 cr, but NBFC stress hit fund flow into real estate: Report

Mumbai attracted the highest investment inflows at Rs 6,100 crore, followed by Pune and Delhi-NCR, the Cushman & Wakefield report said

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Private equity participation in real estate saw a 10 per cent rise in the first half of 2019 to Rs 29,284 crore, even though investments tapered out in the second quarter of 2019 and declined by 34.4 per cent quarter-on-quarter, a new report says.

All asset classes except residential saw a rise in investments in the first six months of 2019, while inflows in the residential class fell to half compared to the same period in 2018, driven down by continued stress in the NBFC sector which impeded fresh fund disbursals, said the report by real estate services major Cushman & Wakefield.

One of the factors behind the fund inflows is the NBFC lending activity coming to a halt due to a dearth of refinance for the residential segment. In fact, at just Rs 5,610 crore, investments in the residential segment in Jan-June 2019 were the second lowest in the like period in the last five years.

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The office segment remains a hot investment target, garnering Rs 6,280 crore from institutional investors, accounting for a 54.1 per cent share of the total investments in the second quarter of calendar year 2019. In fact, the investments were higher by almost 37 per cent in the first six months of 2019 compared to same period last year.

Strong office demand, low vacancies and rising rents continue to drive the momentum in PE activity.

The success of the Blackstone-Embassy REIT has also injected momentum in the commercial office investment space, with key learnings for institutional investors around portfolio creation, management and returns, the report said.

“We expect that the activity in the commercial sector, primarily office, shall continue on a strong footing with retail platforms and acquisitions of key retail developments also on the anvil. Warehousing and logistics are likely to find strong investor support through existing dry powder and plans being firmed up by global players,” said Anshul Jain, Country Head and Managing Director, Cushman and Wakefield India.

The residential sector is likely to see a further period of strife, as NBFCs struggle with liquidity woes, he said.

Retail and warehousing/logistics sectors attracted 12.1 per cent and 7.9 per cent share of PE inflows respectively in the second quarter (April-June) 2019. Half yearly investments in both these asset classes strengthened at 21 per cent and 62 per cent year-on-year growth respectively.

ADIA-backed Lake Shore India Advisory invested Rs 1,400 crore in an ongoing retail project in Gurugram — a key deal in the retail asset class in the second quarter — the report said.

Among cities, Mumbai attracted the highest investment inflows at Rs 6,100 crore, 52.6 per cent of the fund flows in the April-June quarter of 2019. This was followed by Pune and Delhi NCR, which got 12.5 per cent and 12.1 per cent respectively. Multi-city investments (all of which were in the office sector) constituted 15 per cent of the quarterly fund flows.

Foreign investors accounted for 59 per cent of all investment activity during the quarter, with an additional 21 per cent share coming in fund investments via the platform route. Domestic lenders were largely absent, with NBFC lending a virtual standstill.

Only global PE-backed NBFCs are scouting for right opportunities in the residential market, the report said.

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First Published on Aug 8, 2019 12:18 pm
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