PE investment in real estate to cross Rs 12,000 cr

Private equity investment in real estate sector jumped over two-fold to Rs 4,100 crore in the first six months of 2014 and is likely to cross Rs 12,000 crore by end of the year.

According to a report by property consultant Cushman & Wakefield, the PE investment in the sector was Rs 6,450 crore in 2013.

The consultant noted that there is an increase in interest globally in committing funds for Indian real estate through private equity. The funds are being raised mainly for housing projects and leased office purchases.

"Private Equity (PE) investment in real estate in India is likely to exceed Rs 12,000 crore (about USD 2 billion) by the end of 2014," C&W said.

The first six months witnessed PE investments in realty sector of about Rs 4,100 crore, and the consultant expects it to be about Rs 7,900 crore in the second half.

"The total investment in first half of 2014 was more than double the investment in the first half of 2013 at Rs 1,650 crore. This is also the highest levels of investments in the first half of the year since H1 2009," C&W said.

Of the total PE inflows in the first half, housing segment accounted for nearly 60 per cent at Rs 2,357 crore. Office assets contributed Rs 1,435 crore and retail Rs 300 crore.

"In the residential asset class, private equity funds are now being viewed favourably by developers as PE money is being used for de-risking projects and as strategic long term partnerships for further expansion and development," C&W said.

Total number of deals in the first half of 2014 increased to 28 compared to 13 in the year-ago period. Average deal size increased by 16 per cent to Rs 146 crore.

Bengaluru witnessed the highest levels of transaction activity in the first half with investments of Rs 2,005 crore, a sharp increase from Rs 103 crore in the year-ago period.

Mumbai received a PE investment of Rs 1,140 crore, while transaction volumes in NCR and Pune were recorded at Rs 580 crore and Rs 167 crore, respectively, during H1 2014.

C&W Executive Managing Director South Asia Sanjay Dutt said: "Clarity in the governance process and the advent of a stable government with BJP winning elections with a thumping majority at the centre will be critical to the stability of the investment market."

Stating that PE investment is largely towards commercial office space with high occupancies or for residential projects as construction capital, Dutt said this trend is expected to continue for the rest of the year.

"There is high liquidity being committed from both domestic and offshore investors," C&W said.

Many sovereign and pension funds are also committing funds to Indian real estate, like All Pensions Group, Abu Dhabi Investment Authority, Qatar Investment Authority, Canada Pension Plan Investment Board, State General Reserve Fund of Oman and GIC of Singapore, through fund managers.

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