Private Equity (PE) investment in the real estate sector shifted from residential to commercial realty, Knight Frank India has said in its latest report.
The investment grew at a Compounded Annual Growth Rate of 36% from $2.5 billion (₹17,200 crore) in 2014 to $8.6 billion (₹59,100 crore ) in 2017. Mumbai attracted ₹23,400 crore, which is 40% of PE investment that went into office space assets in the country. The report, Realty Asset Monetisation 2018 – An Overview, said the average investment per deal increased almost 2.5 times from $40 million (₹270 crore) per deal in 2011 to $102 million (₹700 crore ) per deal in 2017.
In the first six months of 2018, $4.9 billion (₹33,700 crore ) has been invested across 31 deals with an average investment per deal of $158 million (₹1,080 crore). The figure is almost four times the average investment per deal in 2011, the report said. “While PE investments into residential sector languished, investors flocked to commercial assets. Investments into office spaces grew steadily; but warehousing sector witnessed significant traction,” the report added.
Reasons for change
Shishir Baijal, chairman and managing director, Knight Frank India, said, “The real estate industry has been through a churn over the past few years due to structural reforms like demonetisation, GST and RERA. This led to a reduction in investment risk perception and coupled with availability of matured assets it resulted in a record ₹57,300 crore worth of PE investments witnessed in 2017.”
“While office market has continued to remain strong, a closer look indicates that the once overlooked segments of retail and warehouse have seen a renewed interest from global institutional investors,” he added.