Foreign PERE investments in India grow by 33% y-o-y

In a recent report entitled “Opportunities for foreign investors in Indian Real Estate”, global real estate consultancy Cushman & Wakefield has reported that the total private equity (PE) investments from foreign funds in Indian real estate increased 33%, from USD 1,676 million (approx. INR 11,306 crores[1]) in 2014 to USD 2,220 million (approx. INR 14,974 crores) in 2015. Owing to high property prices and high investment potential, Mumbai was accounted for about 35% of the total foreign investments in 2015, followed by Delhi NCR accounting for about 25% of the investments.

The structured debt deals, i.e. investments that are primarily debt transactions organized in a manner that offers assured returns to the investor, accounted for almost half (49% in value terms) of the total PE investments in 2015. These structured debt deals are an attractive investment option for investors as its fully secured and guarantees returns on pre-decided terms. The structured deals strategy, though moderated due to increased competition, offers returns in the range of 15% – 17% to its investors. While only 18% of total foreign PE investments were structured debt, about 94% of the domestic PE investments adopted the structured deal strategy for investments during 2015.

“The three large cities; Mumbai, Bengaluru and Delhi-NCR continue to attract the highest investments in India and account for about 75% of these investments. However, with government initiatives to de-stress these cities, relaxed FDI norms and focus to improve infrastructure across the country, other cities in India are likely to witness rise in PE investments going forward. These initiatives have made India as one of the largest markets for real estate investments offering a huge investment potential to foreign investors that were largely restricted until now” says Sanjay Dutt, Managing Director, India, Cushman & Wakefield.

The FDI policy enforced conditions with regards to project status, project size, lock-in periods, etc. due to which the eligible stock of real estate projects for foreign investors was limited predominantly to large projects with development size of over 0.54 million sq. ft. Owing to relaxation in FDI norms in 2014 & 2015 the entire real estate stock is now accessible to foreign investors. At the end of 2015, the Indian real estate market is estimated to have investment potential of USD 54bn to 67bn USD in completed grade A office stock that can generate USD 5.4bn of rental income. On the residential side, the market potential includes over 900,000 units that are scheduled for completion in the coming 4 years.

[1] Conversion Rate: INR 67.45 = USD 1


Sitara Achreja, Director, Marketing & Communications

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