PE INVESTORS PUMP IN USD 2.6 BN INTO REAL ESTATE; INFLOWS INTO RESIDENTIAL ASSETS HIGHEST IN 10 QUARTERS: CUSHMAN AND WAKEFIELD
- PERE inflow up 15% Y-O-Y
- Residential sector takes the lead, followed by office sector
- Mumbai attracts highest PE investment, followed by Delhi-NCR and Hyderabad
India, April 30, 2018: Private equity inflows into real estate rose 15% Y-O-Y to INR 165.3 billion (USD 2.6 billion) during the first quarter, eclipsing the inflows of the first quarter of the previous 11 years, as per global real estate consultancy Cushman & Wakefield. The residential sector gained prominence in inflows with the highest ever inflows in 10 quarters, as investors look to gain from government incentives in affordable housing.
During the quarter, private equity inflows into the residential sector more than doubled (Y-O-Y) to INR 85.18 billion (USD 1.32 billion), backed by a large platform transaction between Housing Development Financial Corporation (HDFC) and Abu Dhabi Investment Authority (ADIA). Mumbai accounted for approximately 19% of the total deals in the residential sector.
“The strong inflow level is testimony to the attractiveness of the Indian real estate market for institutional investors. Affordable housing projects continues to see interest from institutional investors, driven by strong end-user demand and government incentives for both developers and homebuyers. We foresee inflows into this segment to be on the rise over the next few years. During the remaining part of this year, we are also likely to witness some marquee deals in the office sector by private equity majors (including pension and sovereign funds), amidst strong leasing and limited availability of quality assets in core markets. The Industrial & Warehousing sector, backed by key economic reforms (GST, infrastructure status to logistics, 100% FDI in e-commerce marketplace) is also emerging as a compelling opportunity for investors.”- Anshul Jain, Country Head & Managing Director India, Cushman & Wakefield
Office sector, recorded inflows of INR 61.00 billion (USD 0.94 billion), which is a 40% decline from the corresponding quarter last year. The decline in investments is due to postponement of closure of certain notable transactions to forthcoming quarters. The country’s buoyant office sector continues to attract heightened interest from foreign investors who are building up a portfolio of rent-yielding assets, and thereby altering the ownership pattern (between developers and private equity investors) of office stock in major cities.
The sunshine sector of Industrial & Warehousing received inflows of INR 3.5 billion (USD 0.05 billion) in a Logistics Park near Chennai as part of a platform formed between Ascendas-Singbridge and Firstspace Realty. The sector received a significant investment of INR 65.36 billion (USD 1.01 billion) during 2017.
Retail developments in Tier-II cities have been attracting attention of investors due to the investment prospects in these cities backed by demand for space by retailers amidst lack of quality retail spaces. In continuation of this trend, Blackstone acquired a majority stake in Esplanade Mall, Bhubaneswar for INR 2.5 billion (USD 0.04 billion). Over the last two years, investors have ploughed in funds in tier II cities like Coimbatore, Surat, Mohali, and Indore.
Mumbai witnessed the highest investments during the quarter with inflows of INR 63.3 billion (USD 0.97 billion), primarily led by the office sector. The city also noted the largest investment transaction for the quarter, the stake acquisition by Blackstone in two office projects of Indiabulls Real Estate.
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Cushman & Wakefield is a leading global real estate services firm with 45,000 employees in more than 70 countries helping occupiers and investors optimize the value of their real estate. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.