US-based PE funds may reconsider investment plans in India this year: Anarock

US-based private equity funds, which have pumped in USD 5.7 billion in Indian real estate sector since 2015, may reconsider their investment plans for this calendar year due to severe economic fallout of the coronavirus pandemic in America, according to property consultant Anarock Capital.

Private equity firms from the US invested USD 830 million in 2015, USD 530 million in 2016, USD 1,190 million in 2017, USD 1,350 million in 2018 and USD 1,800 million in 2019.

A major chunk of the US private equity inflows in India since 2015 focused on the lucrative commercial real estate segment, with Blackstone, Hines, Warbug Pincus and Goldman Sachs among the top investors.

India has been a major draw for US-based private equity players over the last few years, said Shobhit Agarwal, MD and CEO Anarock Capital, which is a subsidiary of Anarock Property Consultants.

In 2019 alone, US-based firms comprised 36 per cent share and pumped in around USD 1.8 billion out of the total USD 5 billion PE inflows in Indian realty.

"But considering the rising pandemic fallout in the US, there is high possibility that inflows will drop significantly in 2020, thus impacting overall inflows into the country, he stated.

As things stand now, US private equity funds might reconsider their India investment plans, he said.

"However, some of the cash-rich funds could also leverage the COVID-19 fallout to optimal advantage. As and when they enter Indian shores (hopefully towards the second half of 2020), they will scout for good bargains and value-pick options on their own terms. Indian developers may see reduced valuations," Agarwal said.

Other prominent PE players investing in Indian real estate are based out of Singapore, Canada, and UAE, among others.

Of the total USD 5.7 billion PE funds pumped in between 2015 to 2019 by US private equity firms, Anarock Capital said that close to USD 3.5 billion (61 per cent) targeted commercial real estate.

The retail real estate segment came next, attracting nearly USD 1 billion while the residential real estate drew close to USD 500 million. Over USD 400 million was pumped in mixed-use developments and more than USD 300 into the logistics and warehousing sectors.

Recently, Anarock said that the leasing of office space across seven major cities of India to decline 30 per cent to 28 million sq ft in 2020.

"This is because most multi-nationals and domestic businesses will re-strategise their expansion plans and optimise operational costs in the wake of the COVID-19 pandemic. All these factors will inevitably impact the Indian investment plans of US private equity majors as well," Agarwal said.

The home-grown consulting firm, which posted revenue of nearly Rs 200 crore in the 2018-19 fiscal, is a leading brokerage firm in the housing sector.