January-June PE inflows into realty up 33% to Rs 5,193 cr
The private equity investment in real estate stood at Rs 3,900 crore during January-June period of last year. According to JLL India, the PE inflow in IT & commercial (office) segment increased by 19 per cent to Rs 3,256 crore during the first six months of 2016 as against Rs 2,729 crore in the year-ago period.
“In first half of 2016, the total PE inflows into office realty has crossed the annual total seen in 2015. It may even cross the previous five-year high seen in 2014. It, however, still remains way behind the residential asset class, which still gets the maximum share of PE inflows into real estate as a whole,” JLL India Chairman and Country Head Anuj Puri said.
During the full last year, PE inflows in real estate stood at Rs 8,740 crore, of which 3,229 crore was in office segment. “Whether 2014 (when office overtook residential as PE funds’ favourite) will repeat again, still remains to be seen. However, it is clear that the PE momentum seen in recent years in this sector looks set to continue,” Puri said. Among the big ticket deals so far this year, JLL said that Bengaluru-based RMZ Corp bought office building in Mumbai for Rs 2,400 crore.
Puri said the equity flows in the commercial sector turned stronger although the right asset remains a key consideration. The increasing share of equity financing is a key indicator that investors are looking to become project partners and points towards their strong positive sentiments for commercial assets, JLL said.
A major consideration in recent times for commercial assets has been the REITs guidelines and further incentives from the government to support REIT listings. “On the other hand, in the last three-four years, equity flows have reduced in the residential sector and made way for largely debt and structured instruments,” Puri said.
‘International investments to boost real estate sector’
With global investors committing over $2 billion in the Indian real estate sector, credit rating agency ICRA said developers would be able to acquire new projects and ensure healthy launch pipeline. Commercial real estate sector has witnessed increasing participation by various large global funds and private equity players, buoyed by the gradual recovery in the sector since 2014-15 fiscal, it said.
Of late, it added, many of the global institutional investors have also started looking at housing segment favourably. The tie-up with international investors would help real estate developers build a healthy launch pipeline, it said. “The stress in the industry has made available ample of investment opportunities in the sector at attractive rates,” ICRA Ratings VP Shubham Jain said.