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PE investments in real estate surge on lower risk perception, availability of mature assets: Report
The Hindu Business Line  |  July 12, 2018

Our Bureau Mumbai

Private equity (PE) investments in Indian real estate have grown at a CAGR of 36 per cent since 2014 to stand at Rs 59,100 crore in 2017, bolstered by a reduction in the investment risk perception and availability of mature assets, real estate consultant Knight Frank said today.


The average investment per deal increased almost 2.5 times from $40 million or Rs 270 crore in 2011 to $102 million (Rs 700 crore) in 2017. In the first six months of 2018, $4.9 billion (Rs 33,700 crore) has been invested across 31 deals, with an average investment per deal of $158 million. This is almost four times the average investment per deal in 2011, Knight Frank said in the report on Realty Asset Monetisation 2018.


“The real estate industry has been through a churn over the past few years due to a slew of structural reforms. This has led to a reduction in the investment risk perception coupled with availability of mature assets, resulting in a record Rs 57,300 crore of PE investments in 2017 alone,” Shishir Baijal, Chairman and Managing Director, Knight Frank India, said.


While PE investments in the residential sector have languished, investors have flocked to commercial assets with the inflow into the office segment growing steadily and warehousing witnessing a significant traction. “A closer look indicates that once-overlooked segments of retail and warehouse have seen renewed interest from global institutional investors,” he said.


Warehousing has seen an investment of Rs 28,822 crore since 2011, while the number for retail is Rs 10,362 crore. “Warehousing assets require less amount of time, just around 12-18 months to construct, compared to office and retail assets. So 72 per cent of total investments have flowed into greenfield projects,” the report added.


As the Indian real estate space draws interest from global investors, several deals are faced with challenges due to violation of construction norms in the assets. These investors do not want to get associated with non-complaint assets and deals are stuck. “Fully compliant assets are the need of the hour,” Knight Frank added.