Residential PE inflows plunge, commercial on high plane: Study

Chennai: Institutional investors invested more than $4 billion funds across the country’s real estate segments, with total private equity inflows in the segment topping at $266 million in 2018, an 82 per cent decline since 2015, said a report.

Commercial real estate drew the lion’s share with $2.8 billion in PE funds, added the report.

The average deal size increased by over 170 per cent in four years – from $47 million in 2015 to $128 million in 2018. Overall the real estate sector attracted over $4 billion of PE funds in 2018; a decline of nine per cent against 2017. PE equity investment into real estate this year are close to $1 billion, said a report by Anarock titled Private Equity in Indian Real Estate.

At the city-level, Mumbai continued to be the most-preferred destination for overall PE investments, seeing nearly 38 per cent of the total capital inflows in 2018.

Hyderabad witnessed a sudden burst in investments in 2018, attracting more than $1.1 billion of private equity — a more than three-fold increase in investments compared to the collective previous three-year period. Hyderabad surpassed Bengaluru and Chennai, the other two major South Indian cities, in investment inflows, said the report.

The commercial office segment saw the highest inflows, accounting for 70 per cent share of the total institutional investments into the industry in 2018. Retail real estate came in a distant second with seven per cent and the residential sector drew the least private equity among the three sectors, with less than seven per cent of the overall share.

The report says that out of the total PE inflow of $14 billion into the sector in the last four years, 2017 and 2018 collectively saw the maximum investments to the tune of $8.6 billion.

Despite deal numbers declining since 2015, the average deal size has increased by nearly 172 per cent in the last four years, from $47 million in 2015 to $128 million in 2018, stated the report.

Further, the top 5 deals in 2018 alone contributed almost 50 per cent of the total investments during the year, the report said added that PE investors have become more cautious about selecting and associating with developers; however, once confident, they are making larger investments.

NT Bureau