PE investment in realty up 22% at Rs 28K crore in Jan-Sept

Private equity (PE) investments in the real estate sector increased by 22% to Rs 28,300 crore in the first nine months of this year with investors' rising interest in the office and retail assets, says property consultant Cushman & Wakefield.

In its latest report on Private Equity investments in Real Estate (PERE), C&W said that "the year to date (till September 30) inflows in 2016 increased 22% to Rs 28,300 crore billion ($4.24 billion), up from Rs 23,200 ($3.6 billion) recorded during the same period last year".

Of the total PE inflow, housing sector garnered maximum at Rs 15,040 crore — a slight drop from Rs 15,539 crore in the year-ago period.

PE investment in office segment stood at Rs 6,182 crore in the first three quarters of the 2016 calendar year as against Rs 4,091 crore in the year-ago period.

"Owing to the continued interest in pre-leased office assets, the YTD 2016 investments in the commercial office assets have already surpassed the total investment received during the calendar year 2015," C&W said. Office segment received Rs 6,025 crore in the entire last year.

Moreover, with a few large deals for office portfolios in active discussion and deal closure stages, the fourth quarter of 2016 is expected to record the highest annual investments made in the asset class.

Similarly, retail segment got Rs 3,800 crore investment in January-September against Rs 1,020 crore in the corresponding period of last year. In mixed use segment, the PE inflows were Rs 2,866 crore in the first three quarters of 2016 from Rs 325 crore in the same period last year.

According to the report, PE investments in July-September quarter stood at about Rs 9,200 crore ($1.4 billion), down from Rs 11,591.3 crore in the year ago period. Housing segment contributed over 73% (Rs 6,675 crore/$1 billion) of the total PE investment during the third quarter.

C&W India MD Anshul Jain said: "There has been a steady shift in ownership of assets, especially office, from being privately held to institutionally held, moving in line with the global trend. This will further assist the Indian market to attract more and more investment in the sector."

"It also opens door to the successful implementation of REITs in India. Given that investible assets are fewer, we may see a moderate slowdown in investment in office assets in 2017, albeit end of 2016 still looking strong and promising," he added.

Even while residential assets continued to attract the highest volume, it would continue to be dogged with challenges of end user purchases, which has led to a generic decline in the number of launches in the segment, the consultant said.

"Retail which saw a rise in interest from investors should also be seen with some caution as the investments have been made in fully leased successfully operating assets," he said.