According to a report by property consultancy Cushman & Wakefield.
Private equity investments in real estate rose 40% year-on-year
in the quarter to March at Rs 3,840 crore. Of this,48% orRs 1,870
crore went into the residential segment.
The retail real estate segment witnessed the second highest
investment, accounting for 26% of total investments in the
quarter since 2008 on the back of a single investment, where
Singapore’s sovereign wealth fund GIC bought the Viviana Mall in
Mumbai from Sheth Developers for Rs 1,000 crore.
The commercial office segment recorded total investment of Rs 470
crore again in just one transaction where Blackstone invested in
Salarpuria Sattva group’s project in Knowledge City in Hyderabad.
In 2015, private equity investments from foreign as well as
domestic funds in Indian real estate grew 72% over the previous
year to Rs 25,680 crore, the highest since the peak of 2008. In
2015, 70% of the total investments went to the residential
segment, followed by the commercial segment at 21%.
In the quarter to March 2016, investments in Mumbai increased 12
times from the corresponding quarter of the previous year to 44%
(Rs 1,710 crore) of total investments. This was followed by
Hyderabad, which got a 19% share with investments of Rs 720 crore.
The Delhi-NCR region got 12.5% of the investments at Rs 480 crore,
though investments here were only in the residential space.
“Domestic funds have continued to invest and focus primarily on
the residential asset class as developers raised funds to meet
their growing funding needs for working capital, construction
financing and refinancing of loans,” said Sanjay Dutt, managing
director-India at Cushman & Wakefield.
Dutt pointed out that the investments are being made mostly at
the special purpose vehicle (SPV) level, amid a slowdown in
residential sales over the past few years. Some of the large
foreign PE funds such as Blackstone, GIC and Xander have sought
to diversify their investment portfolios in India and are
venturing towards the retail, mixed-use and hospitality segments
apart from investments going into commercial and residential
“This could be attributed to several opportunities arising
across India wherein developers have been trying to raise
capital by monetising their distressed or noncore assets to
reduce the high debt levels,” he said.
The total number of deals closed during the March quarter
increased 13% to 17 from 15 in the corresponding quarter of
2015. The average deal size increased 23% to Rs 230 crore.
But unlike the year-ago quarter that saw investments only in
residential assets, the quarter to March 2016 witnessed
investments across asset classes.
In the residential space, financial services firm IIFL invested
Rs 500 crore with Aristo Realtors In Mumbai through a
structured debt transaction. KKR India Asset Finance put in Rs
150 crore with Sunteck Realty in Mumbai.
Dutt said the SPV level route continues to be the most
preferred by domestic as well as foreign PE funds.
“However, it is observed that joint venture partnerships and
strategic alliances route have picked up over the past two
years,wherein more foreign PE funds, pension funds and global
financial institutions have entered into such partnerships with
their Indian counterparts and real estate developers,” he said.
In the last few quarters, funds dedicated to specific asset
classes have been set up through partnerships between builders
and funds to invest in income generating commercial and
residential assets besides the warehousing sector.