PE inflows in real estate up 33% at Rs 5,193 cr in Jan-June

Private equity inflows in realty sector rose by 33 per cent to Rs 5,193 crore in the first half of 2016 on improved investment climate following reforms like real estate regulatory law, ease in FDI rules and introduction of REITs, according to property consultant JLL.
The private equity investment in real estate stood at Rs 3,900 crore during January-June period of last year.
According to JLL India, the PE inflow in IT & commercial (office) segment increased by 19 per cent to Rs 3,256 crore during the first six months of 2016 as against Rs 2,729 crore in the year-ago period.

"In first half of 2016, the total PE inflows into office realty has crossed the annual total seen in 2015. It may even cross the previous five-year high seen in 2014. It, however, still remains way behind the residential asset class, which still gets the maximum share of PE inflows into real estate as a whole," JLL India Chairman and Country Head Anuj Puri said.
During the full last year, PE inflows in real estate stood at Rs 8,740 crore, of which 3,229 crore was in office segment.
"Whether 2014 (when office overtook residential as PE funds' favourite) will repeat again, still remains to be seen. However, it is clear that the PE momentum seen in recent years in this sector looks set to continue," Puri said.

Among the big ticket deals so far this year, JLL said that Bengaluru-based RMZ Corp bought office building in Mumbai for Rs 2,400 crore.

Puri said the equity flows in the commercial sector turned stronger although the right asset remains a key consideration.
The increasing share of equity financing is a key indicator that investors are looking to become project partners and points towards their strong positive sentiments for commercial assets, JLL said.
A major consideration in recent times for commercial assets has been the REITs guidelines and further incentives from the government to support REIT listings.
"On the other hand, in the last three-four years, equity flows have reduced in the residential sector and made way for largely debt and structured instruments," Puri said.

He attributed this to slowdown in housing segment over the past two-three years, making investors conservative by turning to construction debt, last mile funding and receivables bundling to ensure that their investments were protected against the lien of the asset.