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Private equity inflows in real estate at Rs 46,200 crore in 2018 Mumbai records largest share  |  February 12, 2019

Moneycontrol News

Private equity inflows touched Rs 46,268 crore in 2018 with Mumbai recording the largest share of 27 percent of investments among all cities, as per a report by Cushman & Wakefield.


Office sector led the investment inflows commanding 46.4 percent of the annual fund flows.


Residential segment investments accounted for a 29 percent share of the total. Though the percentage share was on par with the previous year, investment volumes in absolute terms saw an 11 percent year-on-year dip, standing at Rs 13,320 crore.


"Institutional investors’ appetite for Indian real estate continues to be strong led by office properties. The hospitality sector also made a rebound, while retail, industrial and mixed use saw a leaner year compared to 2017, primarily on account of lack of quality products. We expect the private equity trend to be cautiously positive in 2019, especially given the slowdown in NBFC market provided there are no global economic or political shocks," said Anshul Jain, Country head and Managing Director, Cushman & Wakefield India.


Even though there was a 10.6 percent year-on-year decline in investment volumes was seen, this was still second only to the peak investment volumes seen in 2017. The decline was also attributed to the NBFC liquidity crisis which brought funding from these vehicles to a virtual standstill in the last quarter, the report says.


Mumbai led with the highest share (27%) of investments amongst all cities, as was the case in the previous year as well. The city recorded the largest transaction for 2018 with Blackstone acquiring a 50 percent stake in two office assets of Indiabulls Real Estate. In another marquee transaction, Brookfield Asset Management acquired Equinox Business Park in Mumbai in the beginning of 2018.


Hyderabad's share in investment volumes rose from 2 percent (in 2017) to 17 percent year-on-year. Leasing activity volumes of 10 mn sf in 2018, with a strong pre-commitment flavour, where the city's upcoming supply in 2019 is already preleased to the extent of 60 percent and continuing tight vacancies in its key office corridors, led to the city finding immense favour with institutional investors for quality office assets. Xander, Blackstone, Ascendas India Trust and Allianz-Shapoorji Pallonji platform committed Rs 6,550 crore across four separate office transactions in Hyderabad.


Chennai was third with a 13 percent share in investments with the city standing out for the fourth quarter's largest PE transaction with Mapletree Investments acquiring SP Infocity from CPPIB-Shapoorji Pallonji.


The commercial office sector commanded a 46.4 percent share of the investment volume in 2018 at Rs 21,480 crore. Signalling the strong interest in this asset class, investments in 2018 grew by a multiple of 1.5 times compared to 2017 with foreign investors contributing a majority share. The Embassy-Blackstone REIT listing expected in the subsequent quarters will further enhance institutional interest in investible-grade rent yielding assets along with core plus and greenfield developments, the report notes.


Residential segment investments accounted for a 29 percent share of the total. Though the percentage share was on par with the previous year, investment volumes in absolute terms saw an 11 percent year-on-year dip, standing at Rs 13,320 crore.


The major factor was the hit experienced on account of NBFCs suffering from a liquidity crisis which impacted disbursals and new deals with NBFCs being the major source of refinancing and lending for residential projects in the last two years.


The highlights for the residential segment in 2018 included creation of new platforms with HDFC & Abu Dhabi Investment Authority committing USD $550 million for affordable housing, with an additional commitment of USD $90 million by NIIF. HDFC Capital Advisors also created a $390 million platform with Prestige Estates for low and mid-segment housing. There are early signs of equity returning to this asset class with large platforms looking at established developers.


Industrial and warehousing segment constituted 6.2 percent of the annual investment flows at Rs 2,870 crore in 2018.


The investment platforms between Ascendas-Firstspace and Allianz-ESR acquired logistics and warehousing assets in Chennai and Pune respectively. This sunrise sector is expected to witness further traction with the year recording a $1.2 billion fund raising by Indospace along with the ESR-Allianz tie-up worth $1 billion for developing and acquiring warehousing and logistics assets.


Retail segment investments were a little slower with the year recording inflows of Rs 1,990 crore, a share of 4.3 percent of the total. Investors' interest in this asset class along with fund raising activity is likely to be maintained in the year ahead. Warburg Pincus is planning to form a $1 billion realty platform with Runwal Group for investment in retail-led mixed-use properties.