Track2Realty: USD 2 Billion (INR 11,854 crores) is available with private equity firms ready to be deployed in real estate, despite a drop in the PE investment in the first half of 2013, says Cushman & Wakefield’s latest report on the private equity (PE) in real estate investment.
While the PE investments in real estate was recorded at USD 276 million (INR 1,638 crores) in H1 2013, which is 46% lower when compared to first half of 2012 (USD 514 million / INR 3,050 crores), the PE funds continue to show keen interest in the market with a number of deals in discussion. This decline in the quantum of PERE investment was essentially due to less number deals (13 in H1 2013) as the average ticket size of deals remained same.
In a reaction to the current prevailing volatility in the market, including slower growth of the Indian economy, political stalemates and depreciation of the Rupee, the pace of growth of the Real Estate industry in India has been impacted. While there is a strong investment sentiment for PERE transactions in India however they display a reflection of the market sentiments where funds are looking at only embarking on projects with strong fundamentals.
Commenting on the report, Sanjay Dutt, Executive Managing Director South Asia, Cushman & Wakefield said, “It is noteworthy that despite a slowdown in the construction market and reduced number of investible projects in India, real estate features as the fourth most invested sector by Private Equity Funds in the latest report. It has traditionally been one of the most preferred investment categories on account of buoyant demand for real estate.”
Sanjay further said, “Currently, it is estimated that approximately USD 2 Billion (INR 11,854 crores) is ready to be deployed in the real estate sector of the Indian market. The fund raising environment (domestic and offshore) has consistently improved with more quality capital available for the sponsors with demonstrated track record. Investors are willing to invest in real estate; however they are exploring the market for right real estate projects. We anticipate that in the next few quarters, after some regulatory and politico- economic environment are regularized, the momentum in real estate will pick up throwing open more investible options for the investors.”
The total value of investments in the residential segment recorded at USD 156 million (INR 9.3 billion) in H1 2013 witnessed a drop of 48% over last year. The total value of investments in the office segment was also lower in H1 2013 at USD 118.1 million (INR 7.0 billion).
However, there is a strong growing trend towards investments in ready office space. The growing stability of the market is reflected by the continuous growth of the core investors (number and value) with over USD 1.3 billion (INR 7,705 crores) invested in ready office space during the last three years.
In 2013, the highest value of private equity investments is noted in Pune USD 131.6 million (INR 7.8 bn) followed by Mumbai at USD 67.5 million (INR 4 bn), NCR at USD 38.8 million (INR 2.3bn) and Bengaluru at USD 16.9 million (INR 1 bn). Pune witnessed transactions such as the Panchshil Realty and Ireo Management Ltd SEZ by Blackstone for USD 75.9 million (INR 4.5 billion).
