PE investment in real estate to drop 31% at $4.6 bn in 2020; $6 bn in 2021

Private equity (PE) investment in real estate is estimated to fall 31 per cent year-on-year during 2020 to USD 4.6 billion due to an adverse impact of the COVID-19 on economic growth, according to property consultant Savills.

In its 'Beyond The'20: Private Equity in India Real Estate', Savills India expects the PE inflow to bounce back and grow by 30 per cent in the next year to USD 6 billion.

"Savills Research anticipates private equity investments in real estate in 2020 to witness a significant contraction of about 30% as compared to 2019 at about USD 4.6 billion," the report said.

"Likely investment of USD 6 billion in 2021, a 30 per cent Y-o-Y growth," it added.

During the last one decade, Savills said the real estate investments have followed an overall segmental pattern in the last decade - residential in the early phase, commercial and warehousing in the middle and alternate segments lately.

"Next wave of investments to be driven by quantum growth in warehousing, affordable housing and data centres; commercial office segment, meanwhile is expected to remain steady," the report said.

However, the consultant said that policy support and steadfast implementation would be critical in gradual recovery of investment volumes back to a pre-COVID level.

"A likely repair of the bruised economy, improving trade relations, policy support and progress on the vaccination front, are the key factors which would drive the sentiment henceforth. The resultant push in PE investment could lead to USD 6 billion in 2021," the report said.

Savills said warehousing segment is poised to consolidate its position as a high-preference asset class for private equity investors and appears quite well-positioned to attract investments in increasing volumes. Data centres as investment avenues are also likely to emerge strongly, it added.

PE interest in commercial office investments and affordable housing is expected to retain preference as well.

"At the other end of the spectrum, battered heavily through the impact of the pandemic, retail and hospitality segments are likely to witness stress in near future. However, selective and opportunistic cherry-picking avenues would hopefully keep PE players interested," the report said.

UK-based Savills began its India operations in early 2016 and has o?ces in Bengaluru, Mumbai, Delhi NCR, Chennai, Pune and Hyderabad.

Savills India is a full-service advisor o?ering commercial advisory & transactions, project management, capital markets, valuations & professional services, research & consulting, industrial & logistics, and residential services.