Share of residential-focused PE funds jumps to 85%

The share of residential-focused funds has gone up from 14% to 85% in the last seven years, a JLL report says

Residential realty-focused funds’ share in total property funds has grown from 14 per cent to 85 per cent in the past seven years, according to a new report by property consultant Jones Lang LaSalle (JLL).

During the same period, diversified funds’ share dropped from 66 per cent to negligible levels, the report added.

“These two trends show the investment approach of investors has changed from weighing every asset class on the opportunity it presented to becoming residential-focused, as this asset class has given maximum returns over the years,” said Anuj Puri, chairman, JLL India. Indian real estate has witnessed PE investments worth $2.2 billion since 2014.

“This is even before taking into consideration the platform-level deals, which are worth $2 billion. When we compare the quantum of activities in the past 18 months to investments between 2009 and 2013, worth $3.9 billion, this uptick is clearly evident. Per-year investment has increased by two times,” said the JLL report.

The report also noted PE funds were increasingly becoming selective. “During 2005-08, investments were not only seen across all real estate asset classes, but investors also invested in Tier-II and Tier-III cities. As many as 30 Indian cities enjoyed investment during this phase. Post this phase, however, the selection criteria has become stricter and due diligence has increased — displaying a maturing of India’s real estate PE industry.”

From 2014, it is largely the developers with very good track records that have managed to attract investments. At the same time, investors have restricted themselves to seven to eight cities only and a bulk of investment has gone into residential and office assets — showcasing a clear focus among the investors, the report said.