India’s office property segment continues to remain the favorite amongst the private equity investors who pumped in of $1.7 billion into this segment in the quarter ended March through ten major transactions. Commercial assets accounted for more than 70% of total investments made by private equity players into Indian real estate.
This is the highest amount of private equity investments witnessed in commercial real estate over the last four quarters. The first quarter of 2017 had seen total $1.9 billion invested by these firms into Indian commercial assets through six transactions, data from Venture Intelligence showed.
“More foreign institutional investors, including pension and sovereign funds, are showing interest in Indian commercial real estate. Given their appetite for big-ticket transactions, the tally is skewed in favour of office assets and this has been going up in recent quarters,” said Arun Natarajan, founder of Venture Intelligence, a data analytics firm tracking private equity.
Real estate companies and projects across India attracted 16 investments with an announced value of nearly $2.3 billion during the quarter ended March. The commercial segment was followed by the residential segment that attracted five investments worth $568 million.
“The imminent listing of Real Estate Investment Trusts (REIT) is certainly making things easier for these investors for their exit strategies, which were so far largely dependent on secondary deals. Investors’ focus on commercial properties is expected to continue hereafter as well, albeit logistics and warehousing is also picking up now.
Additionally, Logistics Parks will also provide an exit option of InvITs (Infrastructure Investment Trusts),” said Rubi Arya, vice-chairperson, Milestone Capital Advisors. Private equity and venture capital firms’ interest in warehousing space is brisk as indicated by a five-fold jump in investments in the segment in 2017 at $1.04 billion against $221million in 2016.
US private equity major Blackstone Group’s investment of $730 million for acquisition of Indiabulls Real Estate’s 50% stake in Indiabulls Properties and Indiabulls Real Estate Company was the largest investment in the March quarter. These two Indiabulls entities control commercial office assets Indiabulls Finance Centre and One Indiabulls Centre in central Mumbai with cumulative 4.2 mln sqft fully-leased, leasable space.
The next largest investment during the quarter was the $388 million strategic partnership between Prestige Estates Projects with HDFC Capital Advisors to support its business in the mid-income and affordable housing segments. This was followed by the acquisition of Equinox Business Park in Mumbai by Brookfield Asset Management from the Essar Group for $386 million.
The total value of investments during the quarter was down 16% from the $2.71 billion across 21 investments in the same period in 2017. The investment value was also down over 8% compared to the immediate previous quarter, which had witnessed $2.1 billion being invested across 30 transactions.