Private equity in realty sector dips 5.6% to Rs 5,170 cr

Private equity (PE) investment in the real estate sector fell by 5.6% to Rs 5,170 crore in the first quarter this year, over the previous three months, says property consultant Cushman & Wakefield.

It was, however, up by 84% over the January-March period of last year.

"Private Equity (PE) funds invested about Rs 5,170 crore (USD 829.8 million) in the real estate sector in the first quarter of 2015, a decline of 5.6% from the previous quarter," the consultant said in its latest report 'Investment Marketbeat' for Q1, 2015.

PE investments in realty sector declined during Q1, 2015 over the previous quarter due to 65% fall in commercial office investments.

"Of 16 transactions closed in the first quarter of 2015, 15 were pertaining to residential assets totaling Rs 2,750 crore and 1 valued at Rs 2,420 crore was for commercial offices," the report said.

In view of liquidity crunch and subdued demand, the real estate developers find PE funds an important alternate source to meet their funding requirements.

"Chennai registered the highest volume of PE investment at Rs 2,880 crore during the first quarter of 2015, followed by Delhi-NCR at Rs 930 crore and Bengaluru at Rs 900 crore," the report said.

Delhi-NCR, Mumbai and Pune saw a decline in investments over the preceding quarter whereas PE inflow increased in Bengaluru and Chennai.

Number of PE deals also fell to 16 during January-March quarter compared to 22 deals in the previous quarter. Foreign funds executed five transactions during the quarter, compared to eight in the previous quarter.

About 82% of the PE investments during the quarter were by foreign funds and the remaining 18% by the domestic fund.

"With improving macro-economic conditions, enabling policy environment, recovering demand, and increasing capital requirements of the Indian real estate sector, PE funds are likely to make significant investments in the next few years," C&W Executive Managing Director South Asia Sanjay Dutt said.

In 2014, PE investment in the realty sector jumped over two-fold to Rs 15,410 crore compared with the previous year.

The private equity players would continue to favour residential and leased office assets, he said, adding that PE funds would collaborate strictly with renowned developers to protect their investments.