According to Cushman & Wakefield’s latest report International Investment Atlas, the global property investment market recorded a modest 6% rise in activity during 2012 with volumes reaching US$929bn (€714bn).
In what was a difficult year in most markets, investment volumes rallied in Q4 signaling the beginning of real momentum and a return of confidence in the market which could see volumes this year increase 14% to exceed US$1 trillion mark (€815bn) for the first time since 2007.
India was (20th) among the top 20 real estate investment markets globally with investment volume of INR 190 billion (USD 3466 million) recorded in 2012. Majority of the investment in India were through institutional sales (67%) while remaining were through private equity (PE) investments (33%). The market witnessed institutional sales (excluding apartments) of INR 128 billion, concentrated in commercial development sites and office segment including stand-alone and pre-leased office buildings. However the investments in institutional sales saw a decline of 37 % over last year. On the other hand private equity investment in India increased by 7% in 2012 and was noted at INR 62.0 billion.
In terms of value, majority of the Private Equity in Real Estate (PERE) investments were noted in ready income generating / operational office assets at INR 32.3 billion saw an increase of 34% over 2011. Under construction residential projects continued to witness the highest number (25) of PERE deals in 2012 and witnessed private equity investments at INR 28.5 billion.
Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, “Investment in ready income generating / operational office assets have gained strength over the last few years due to lower risk and steady cash flows associated with this type of investment. With increase in number of high value transactions in this sector, the market is moving towards a mature phase.”
China remained the largest global investment market overall thanks to the surge in land sales seen in late 2012. Nevertheless, the US began to close the gap at 2nd position followed by the UK in 3rd place.
In 2012, China and the USA were two key engines of the strong finish – the former benefitting from a record high in land right sales and the latter seeing a rush of activity to beat year-end capital gains tax hikes. However growth was far from limited to these two global heavyweights and a range of other markets in all regions saw a final quarter rally notably Spain, Poland, Norway, Switzerland, India Indonesia, Thailand, India and Australia.
India City Performance in PERE market
Bengaluru witnessed the highest number and value of private equity investments at INR 32.5 billion in 2012, recording more than double of investment over last year, followed by Mumbai with INR 13 billion and NCR with INR 7 billion of investments. However, Mumbai witnessed a marginal decline of 2% while NCR witnessed a decline of 44% in total value of investments compared to 2011.
Sanjay Dutt added, “Bangalore witnessed some high value investments in pre-leased office asset which has led it to be the top runner in the PERE market. However NCR and Mumbai continue to be preferred locations for investments due to the opportunity they offer. NCR market in 2012 saw lower number of investments, as it is an active residential sales market, which obviated the need for PE funding in many projects.”
Asia Pacific - investment activity to rise 15-20% in 2013
Improved macroeconomic conditions with sustainable growth across the region will boost activity and performance resulting in 15-20% increase in investment activity forecast. Investment demand will increase as faith grows in China’s soft landing but demand will also broaden and other markets such as Australia and Japan will be an increasing target for overseas investors while markets such as India and Indonesia are likely to be on the rise.
According to John Stinson, Head of Capital Markets in Asia Pacific for Cushman & Wakefield, “The likelihood of slower growth in Asia has been underlined by the desire of the authorities to better control the property sector, with new measures recently announced in China and Hong Kong for example, aimed not just at the residential market but at the commercial sector as well. This could hit trading activity but could also push up property prices due to scarcity value and could also increase interest in other parts of the region such as India, Indonesia , Malaysia and Singapore.”