Millennium Post

January-March PE inflows into realty more than double

Private equity inflows into the real estate sector jumped more than two-fold during January-March period to Rs 2,800 crore, according to global property consultant Cushman & Wakefield.

During the same period in 2013, the private equity (PE) investment in sector stood at Rs 1,143 crore.
In its latest report on PE investments in real estate, Cushman & Wakefield (C&W) said: ‘Total inflows into the real estate sector for the first quarter of 2014 were recorded at Rs 2,800 crore ($460 million), witnessing an increase of 28 per cent compared to the previous quarter and nearly 2.5 times the investment in Q1 2013.’

Bangalore witnessed the highest level of transaction activity with investments of Rs 1,905 crore during the period under review.
The consultant attributed the the rise to increasing investments in leased office assets by both foreign and domestic funds. Leased office assets have the potential of stable yields and attractive capital values in the asset class. Residential asset class has also witnessed stable investments as developers are increasingly using PE funds to raise capital.

‘Despite stagnant sales, the high coupon rates offered by developers is attracting capital to the asset class. Fund houses have tried to mitigate some of these risks by investing through structured mezzanine deals guaranteeing fixed returns,’ C&W said.
Commenting on the report, C&W Executive Managing Director South Asia Sanjay Dutt said: ‘A number of PE houses have committed funds towards investments in Indian real estate and this is expected to translate into increasing transactions in the sector, especially in income yielding assets.’

‘With expected growth in capital requirements, we see a number of fund houses raising additional capital to invest in the sector,’ he added. Out of total PE investments, the office and residential segments received Rs 1,435 crore ($236 million) and Rs 1,065 crores ($175 million) respectively.

One transaction was also witnessed in the retail asset class in Bangalore with an investment of Rs 300 crores ($49 million).
‘Healthy valuations of the commercial developments, stable yields and potential of rising capital values has led to investors actively evaluating and investing in prime office assets across the top cities,’ C&W said.

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