PE firms ready to deploy $2 bn in Indian real estate sector: Cushman & Wakefield

Says there is strong growing trend towards investments in ready office space

Real estate consultancy Cushman & Wakefield’s latest report on the private equity (PE) in real estate investment states that around $2 billion (Rs 11,854 crore) is available with PE firms for deployment in the Indian real estate sector.

The interest comes despite the fact that PE investment flow in the first half of 2013 dropped by around 46%.

The PE investments in real estate was recorded at $276 million (around 1,638 crore) in first half of 2013 as compared to $514 million (around Rs 3,050 crore) in the same period last year. The decline in the quantum of PERE investment was essentially due to less number deals (13 in H1 2013) as the average ticket size of deals remained same.

The consultancy firm attributed the drop to the volatility in the market, including slower growth of the Indian economy, political stalemates and depreciation of the rupee. While, there is a strong investment sentiment for PERE transactions in India, they display a reflection of the market sentiments, where funds are looking at only embarking on projects with strong fundamentals.

Sanjay Dutt, executive managing director South Asia, Cushman & Wakefield commented that it is noteworthy that despite a slowdown in the construction market and reduced number of investment-worthy projects in India, real estate features as the fourth most invested sector by PE Funds.

It has traditionally been one of the most preferred investment categories on account of buoyant demand for real estate.

PE funds continue to show keen interest in the market with a number of deals in discussion.

He added, currently, it was estimated that around $2 billion is ready to be deployed in the real estate sector of the Indian market. The fund raising environment (domestic and offshore) has consistently improved with more quality capital available for the sponsors with demonstrated track record.

“Investors are willing to invest in real estate; however they are exploring the market for right real estate projects. We anticipate that in the next few quarters, after some regulatory and politico-economic environment are regularised, the momentum in real estate will pick up throwing open more investible options for the investors,” said Dutt.

The total value of investments in the residential segment were recorded at $156 million (Rs 9.3 billion) in first half of 2013 witnessed a drop of 48% over last year. The total value of investments in the office segment was also lower in first half 2013 at $118.1 million (around Rs 7 billion).

However, there is a strong growing trend towards investments in ready office space. The growing stability of the market is reflected by the continuous growth of the core investors (number and value) with over $1.3 billion (Rs 7,705 crore) invested in ready office space during the last three years.

In 2013, the highest value of private equity investments is noted in Pune $131.6 million (Rs 7.8 billion) followed by Mumbai at $ 67.5 million (Rs 4 billion), NCR at $38.8 million (Rs 2.3billion) and Bengaluru at $16.9 million (Rs 1 billion). Pune witnessed transactions such as the Panchshil Realty and Ireo Management Ltd SEZ by Blackstone for $75.9 million (Rs 4.5 billion).