Commercial office spaces and retail sectors were the most favourite Indian real estate investment bet for private equity and institutional investors during 2018.
This is a shift from the earlier preference to the housing sector.
“Besides commercial office spaces, the retail sector also emerged as one of the most vibrant and fast-paced real estate sectors in India in 2018. Among the major policy overhauls, the government further liberalised foreign direct investment (FDI) policies early in the year.
These policy interventions repositioned the Indian retail sector on the global map of investments, attracting a large number of global retailers into India and further fuelling growth of organised retail in the country, said Anuj Kejriwal, managing director and chief executive officer, Anarock Retail.
Between January and November 2018, over $5.5 billion worth of investments were made in the Indian real estate sector by private equity and venture capital funds.
As per the EY investment data, these investments were made in over 40 deals during the same period, except December.
The government’s decision to allow 51% FDI in multi-brand retail and 100% FDI in single-brand retail under the automatic route attracted giants like Walmart.
As per his projections, the retail sector is set to grow from $672 billion in 2017 to $1.3 trillion in 2020.
“This is definitely an achievable figure if we consider one of the clearest measures of growth, namely the increasing focus on the retail sector by private equity players who invested close to $300 million in Indian retail in the first half of 2018,” said Kejriwal.
Last month, there were five deals in the real estate sector, which attracted most investments. As per EY’s data, the investments touched $723 million only during November, which saw Temasek buying out SP Infocity IT Park from Canada Pension Plan Investment Board and Shapoorji Pallonji for $353 million in the largest deal of the year.
On the institutional investment front, real estate services firm JLL in its report ‘Institutional Flow of Funds to Indian Real Estate: Trends and Progress’ said the sector has attracted nearly $30 billion of institutional investments from January 2009 till October 2018. JLL estimates this to potentially touch $5.5 billion in 2018, which is the highest ever since 2009.
As of October end, the sector has investments worth $4.2 billion.
“Institutional investments in 2014-2018 doubled to $20.3 billion compared to $9.4 billion received during 2009-2013,” said the report.
Samantak Das, chief economist and head of research & real estate investment services, JLL India, said, “One of the major drivers for the growing interest of investors in the commercial office space has been the government’s move to bring in progressive modifications in India’s Real Estate Investment Trust (Reit) policy in last three years, making it more market friendly. As a result, global investors have invested significant capital in acquiring large office assets for building their Reit portfolios in India. In particular, 2017 and 2018 recorded maximum investments of $5.9 billion in the office space. This amounts to 72% of the total investments in the commercial office segment during 2014 to 2018.
Besides the commercial office segment, retail also witnessed a sharp rise in investments; from just $134 million during 2009-13, investments in retail surged 11 times to $1.6 billion between 2014 and 2018, the JLL India report said.
The housing segment was among the least preferred, according to experts.
Amit Ruparel, managing director, Ruparel Realty said, “With the government’s push for this segment and ‘Housing for All’, there has been a growing interest of private equity firms towards the affordable housing sector. Though there was a blurry attention by private equity players on residential in general but affordable housing segment received much needed focus in 2018.”
Solid Edifice
- $30bn of institutional investments in real estate sector during 2009-2018
- $20bn of which was invested during 2014-2018
- $8.2bn investment in commercial space for institutional investors during 2014-18
- $1.6bn pumped in commercial space by them in 2009-13
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