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PE investments in realty sector rise 13% at Rs. 7,000 crore in 2013

The Hindu BusinessLine:  February, 2014

Hyderabad: Private equity investments in the country’s real estate sector during 2013 registered a 13-per cent increase Rs. 7,000 crore ($1.2 billion), over the Rs. 6,200 crore ($1.1 billion) done in 2012, according to a report by global real estate consultancy Cushman & Wakefield.

The increase was primarily due to rising investments in residential assets and other sectors such as retail and hospitality.

While the number of deals increased to 40 in 2013 compared to 34 in 2012, the average deal size declined marginally, and was approximately Rs. 175 crore.

Overall, PE investments across sectors have increased by 11 per cent, from $9.49 billion in 2012 to $10.5 billion in 2013.

Raising capital

Given the difficult economic conditions, developers are finding it difficult to raise capital through traditional sources and are opting for alternative means , the report states.

Sanjay Dutt, Executive Managing Director (South Asia), Cushman & Wakefield said: “A number of large global investors, including a number of sovereign funds, have taken the first move by partnering with successful local investors and developers for investing in the Indian real estate market. This is expected to result in high transaction activity, especially in income yielding commercial office assets during 2014.”

The total Foreign Direct Investment inflow in construction development for the third quarter of 2013 was Rs. 3,200 crore, which is the highest quarterly investment since Q3 of 2009.

FDI inflow for the first three quarters of 2013 in construction development was Rs. 5,500 crore, a 25 per cent increase from the same period in 2012.

Bangalore continued to witness the highest level of transaction activity in 2013 with overall investments of approximately Rs. 2,200 crore, though it declined by 33 per cent from 2012.

Both Pune and NCR witnessed an increase in transaction volume in 2013.

Mumbai witnessed a decline of approximately 15 per cent in investments for 2013 to Rs. 1,100 crore. However, investment activity in the city is expected to increase with a few large deals in office assets being currently in the pipeline.