Indian Real Estate Got $14 Billion Foreign Private Equity In Five Years, Anarock Says

Indian real estate attracted nearly $14 billion of foreign private equity between 2015 and third quarter of 2019, says latest Anarock data.

63 percent (approximately $8.8 billion) of the total foreign investments backed commercial real estate, the real estate services company said. The residential sector attracted just $1.5 billion of foreign PE in the same period, trailing even the retail sector which saw cumulative inflows of $1.7 billion.

Logistics and warehousing drew over $1 billion, and the remaining investments went into mixed-use developments.

In stark contrast, domestic PE funds pumped nearly $2.4 billion into Indian real estate since 2015, of which nearly 71 percent (approximately $1.7 billion) went to the housing sector, Anarock said.

This was a period of considerable stress for the residential segment; domestic funds invested heavily into a sector plagued by issues like delayed/stalled units, low sales and fairly lower yields.

This made exiting investments with substantial gains difficult, it said.

The commercial real estate segment, on the other hand, delivered a comparatively stellar performance in the last five years.

Steady demand and rising rentals gave foreign investors a decisive edge.

The top five foreign investors - Blackstone, Brookfield, GIC, Ascendas and Xander - alone contributed 75 percent of the overall $14 billion into Indian real estate.

Interestingly, their focus was not limited to the top seven cities and extended into tier 2 cities like Indore, Ahmedabad and Amritsar.

The top five domestic funds - Motilal Oswal, HDFC Venture, Kotak Realty, ASK Group and Aditya Birla PE - invested nearly 54 percent or approximately $1.3 billion into Indian real estate.

They focused exclusively on the top seven cities.

Indian commercial real estate will continue to attract PE funds as there is high demand for Grade A office spaces across the top Indian cities, according to Anarock.

Earlier data indicated that the first three quarters of 2019 alone saw inflows of $3 billion in the commercial segment - an increase of 43 percent over the corresponding period in 2018.

Logistics, warehousing and retail will continue to witness considerable growth on the back of recently-eased policy norms for the retail sector, aimed at boosting growth and attracting more investments, the company said.

Over the short-to-mid-terms, the housing sector - which has the greatest need for liquidity infusions - will retain its 'poor cousin' status and garner much more gradual attention from wary investors, it said.

Though the Finance Minister Nirmala Sitharaman recently unleashed an alternative investment fund of Rs 25,000 crore to revive languishing housing projects across the country, investors will watch for actual implementation and deployment, it was stated.

According to Anarock, the residential segment drew approximately $295 million PE funding in the first three quarters of 2019 (against $210 million in the corresponding period last year).

Though this constitutes an impressive 40 percent annual gain, investments are still far below the peak levels of 2015, when housing drew PE investments of approximately $1.5 billion, it said.