PE investment in RE rises 22pc y-o-y in Jan-Sept 2016: Report

Private equity investment in the real estate sector has grown 22 per cent during January-September this year to Rs 28,300 crore, from Rs 23,200 crore a year ago, reflecting improved confidence among investors to make larger investments, says a Cushman & Wakefield report.
According to the report, private equity inflow increased to Rs 28,300 crore during the period, out of which nearly Rs 9,200 crore were recorded during the third quarter (July-September) of 2016.
While the number of deals closed during the third quarter moderately declined by 3 per cent quarter-on-quarter (q-o-q) to 32 per cent, the total investments increased by 1.2 per cent, reflecting increased confidence amongst investors to make larger investments.

The average deal size, therefore, increased from Rs 275 crore in Q2 2016 to Rs 287 crore in the third quarter of 2016.
"Owing to the continued interest in pre-leased office assets, the investments in the commercial office assets have already surpassed the total investment received during the calendar year 2015," the report said.
The y-o-y change in investment in office assets has recorded an increase by over 50 per cent as registered in the third quarter.

"Moreover with a few large deals for office portfolios in active discussion and deal closure stages, the fourth quarter (October-December 2016) is expected to record the highest annual investments made in the asset class," it said.

Residential assets witnessed over 73 per cent or Rs 6,675 crore of the total investment during July-Spetember 2016.
"Despite the largest share in total volumes, investments saw a moderate 3 per cent decline when compared to that received in the same period in 2015," it said.
"Domestic funds were most active investors in residential
assets and accounted for 82 per cent of the total investments made in the asset class. The cumulative investments in the residential assets increased 9 per cent q-o-q in the third quarter of 2016," the report noted.
Anticipating a revival in the sector and given the potential to list under the Real Estate Investment Trust (REIT), retail assets are attracting large investments from various funds.

Therefore, the year-to-date investments in retail assets during 2016 increased almost three fold to Rs 3,800 crore, over Rs 1,020 crore noted during the same period of 2015.
"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," Cushman & Wakefield Managing Director, India, Anshul Jain said.
He further said that 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.

"Even while residential asset class continued to attract the highest volume, it will continue to be dogged with challenges of end-user purchases, which has led to a decline in the number of launches in the segment. 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.
While this trend could see a few more commitments in the next 12-24 months ahead, this will not be the rising trends or be a salvage situation for ailing retail properties, he added.