According to data from Cushman & Wakefield, real estate brought in private equity investments worth more than Rs 10,080 cr during the latest quarter ended June, driven by institutional investors’ interest in office and retail properties. Even though the inflow is 22% down year-on-year, it has still eclipsed investments of the second quarter of the previous 11 years, being the second highest.
During the quarter, the office sector continued to rise on sequential basis too, making up for around 42% of the net inflow share across the key six segments and the same is expected to remain in focus in the forthcoming quarters also.
“As office space supply and demand continues to experience a robust increase, coupled with the emergence of co-working spaces in a phenomenal way, the investor confidence in the sector will continue to remain intact. Retail also continues to grow strong, with declining mall vacancy rates constituting the heightened investor interest in this sector,” said Anshul Jain, country head & managing director India, Cushman & Wakefield.
Experts opine that the surge in office investments was an expected trend as the quarter was about to witness conclusion of few key deals by private equity majors in this segment.
With the government doing its bit with a number of reforms, institutional investors, including private equity, sovereign wealth and pension funds, continue to express a healthy appetite for Indian real estate. Key policy decisions, which have resulted in change in global investors’ perception of Indian real estate, include implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA), the Benami Transactions (Prohibition) Amendment Act, 2016, infrastructure status to affordable housing projects, demonetisation, interest subvention schemes, relaxation of norms to encourage Real Estate Investment Trust (REIT) listings and the Goods and Services Tax.
Office sector recorded inflows of Rs 4,295 cr, a 39% increase from the corresponding quarter last year. This segment constituted almost half the investments committed by foreign investors, retail segment constituted 26%, and industrial segment had a 10% share in investments by foreign investors.
Stabilised yield-earning assets and competition among global investors for these assets have pushed the average investment deal size up 21% from a year ago to Rs 560 cr during the quarter.
With global players such as Blackstone, Brookfield, Xander, etc., aggressively building their India real estate portfolio, the segment remained bullish on investment in the first half of 2018.
Among the regions, investment inflows in Mumbai slipped this quarter with inflows of Rs 2,800 cr, although the country’s commercial capital still receives the highest investments seen among the major 6 cities. Leading the investment volume among all cities with a share of 28%, the city noted the quarter’s largest transaction with Brookfield Asset Management acquiring Essar Group’s Equinox Business Park in BKC for Rs 2,400 cr.