Global Real Estate Consultancy, Cushman & Wakefield’s latest report on private equity (PE) investments in real estate revealed total inflows in the real estate sector for the first quarter of 2014 were recorded at INR 2,800 crores (USD 460 million), witnessing an increase of 28% compared to the previous quarter and nearly 2.5 times the investment in Q1 2013.
The healthy increase was due to increasing investments in leased office assets by both foreign and domestic funds given the potential of stable yields and attractive capital values in the asset class. The residential asset class has also witnessed stable investments as developers are increasingly using private equity funds to raise capital. Despite stagnant sales, the high coupon rate offered by developers is attracting capital to the asset class. Fund houses have tried to mitigate some of these risks by investing through structured mezzanine deals guaranteeing fixed returns.
Commenting on the report, Sanjay Dutt, Executive Managing Director South Asia, Cushman & Wakefield said, “A number of funds have committed funds towards investments in Indian real estate, this is expected to translate into increasing transactions in the sector, especially in income yielding assets. With expected growth in capital requirements, we see a number of fund houses raising additional capital to invest in the sector.”
Sanjay Dutt further said, “Investments in real estate by domestic companies has witnessed a significant increase during the first quarter of the year. This was due to companies acquiring land and office assets required to execute growth strategies ahead of the anticipated recovery of the economy in the second half of the year.”