Private equity investments exiting residential real estate, not affordable housing

Sluggish demand in residential real estate combined with demonetization, the Real Estate (Regulation and Development) Act, 2016 (RERA) and Goods and Services Tax has dented private equity investment in the sector.

According to Anuj Puri, Chairman of Anarock Property Consultants during 2017, private equity investments into the residential asset class fell significantly and witnessed a loss of around 25% in overall share compared to the previous year. 

Also, for the first time in last three years, it lost its numero uno position in private equity investment share. The steady fall in appreciation and persistent gloom on the residential property market have caused private equity investors to shift their focus towards other asset classes. Primarily on their radar are commercial real estate in the form of office (predominantly IT/ITeS) and retail spaces, and industrial properties in the logistics and warehousing domain.

This trend is likely to continue in the near future as well, “largely due to the upsurge in demand for ready-to-move-in properties which offer better safety for investors,” said Puri.

However, affordable housing segment will continue to attract private equity investments in 2018. 

Second half of 2017 saw increased forays by some private equity funds and several Tier-I developers. KKR announced an investment of Rs 200 crore in Signature Global’s affordable housing project in Gurugram, while Brick Eagle is also in the process of investing around Rs 700 crore in affordable housing projects.