Private equity inflow in real estate sector rises by 19 per cent in FY 2020-21

MUMBAI: Bucking the pandemic private equity (PE) investments into the India real estate sector rose around 19 per cent in FY 2020-21 to over USD 6.27 billion, according to an Anarock report. During the previous financial year, PE investments into the realty sector stood at USD 5.8 billion.

Indian real estate recorded its highest-ever private equity investments since in the last fiscal, since FY16, noted the Anarock Capital's 'Flux - FY20-21 Market Monitor for Capital Flows'.

Unlike earlier, FY21 saw private equity investors focus majorly on portfolio deals across multiple cities and assets, rather on specific projects or cities. Such portfolio deals constituted 73 per cent of the overall investments, with around USD 4.58 billion invested through portfolio deals in multiple cities.

The average ticket size of PE deals rose by 62 per cent from USD 110 million in FY20 to USD 178 million in FY21. Both structured debt and equity witnessed strong growth during the year at 84 per cent and 15 per cent respectively, said the report. It said that structured debt was largely towards portfolio deals instead of project-level assets.

Though FY21 was an unprecedented year due to the pandemic, foreign PE funds showed much optimism for India. As much as 93 per cent of the total PE investments pumped into Indian real estate were by foreign investors.

Investments by foreign PE funds almost doubled from USD 3 billion to USD 5.8 billion in FY21. In contrast, domestic PE funds invested merely USD 300 million compared to USD 420 million in FY20. Anarock Capital MD & CEO Shobhit Agarwal said: "Foreign funds are evidently very upbeat about India. High-grade rental-generating assets have attracted foreign investors in a big way during the year."

Moreover, India has a strong underlying demand for office space with quality workforce and average rentals available at less than a dollar per square feet per month, he said. "Alongside, the successful REIT listings have provided a good monetising option for PE investors, leading to a stronger demand for good quality rental earning office and retail assets," Agarwal said.