India attracted private equity (PE) investments to the tune of $38,149 million in the calendar year 2020 of which 11 percent share was claimed by the real estate sector at $4,068 million with 21 deals getting concluded during the year, a report by Knight Frank India, a leading property consultancy, has said.
The office sector received the maximum share of PE investments at $2,509 million and saw seven deals getting closed; the warehousing sector received an investment of $971 million and saw five deals in 2020; the residential sector received $368 million and witnessed seven deals, the report said.
Around 21.8 mn sq ft of the office assets were transacted in 2020. The PE investments through the equity route in this space were down 19 percent YoY in 2020 compared to $3,096 million during the same period last year, the report said.
In 2020, the residential sector witnessed seven deals worth $368 million, which were down 49 percent YoY compared to $717 million in 2019. For several years residential prices have been stagnant and have even corrected at specific locations. Though overall PE investment (debt and equity) in residential has come down in the past four years, investors' risk appetite in residential has gone up as the share of equity investments has grown from 35 percent in 2019 to 52 percent in 2020.
In 2020, the warehousing sector attracted PE investments through equity route worth $971 million which were 49 percent YoY lower than $1,895 million during the same period last year. This drop can largely be attributed to a significant percentage of capital committed to the warehousing sector in India over the past three years awaiting deployment. Since 2011–2020, Singapore has the largest share of investment of $2,524 million in the warehousing sector, followed by the UAE with $1,600 million and Germany with $1,000 million.
Since 2011, the retail space has attracted $2,792 million equity investments, claiming a total of 25 deals as of 2020. There were only two deals transacted for $220 million in retail space in 2020 which is a drop of 76 percent YoY compared to $922 million in 2019. The pandemic-induced lockdown had forced all malls to halt their operations and has adversely affected their businesses.
Malls have been amongst the last to open during the unlocking phases and the fear of virus has kept the consumer footfalls low. Such high levels of uncertainty have kept investors away from retail assets. Around 2.7 million sq ft of the retail space was transacted in 2020.
“Despite a slowdown in overall PE investment, we continue to witness a strong investor appetite for rent yielding office assets. Knight Frank believes that with more clarity on the pandemic resolution and sense on structural changes, the deal activity is expected to pick up further in 2021,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
“After a temporary lull due to the global lockdowns in early 2020, India witnessed a sharp resurgence in investor sentiments towards the end of the year. The real estate sector in India witnessed private equity investments to the tune of $4.1 billion in 2020 of which $2.64 billion (64 percent of annual investments) came in the last quarter of 2020. Since 2011, on average investors invested through both debt and equity structures; however, there is a shift in investor’s risk appetite as 96 percent of total PE investment was through the equity route in 2020. We believe the trend will continue in the near future,” said Rajani Sinha, chief economist and national director – Research, Knight Frank India.