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PE investments in real estate this year highest since 2008: C&W report

Livemint:  August 26, 2015

Bengaluru: Private equity (PE) investments in the real estate sector between January and June are estimated at Rs.11,080 crore, the highest since 2008, owing to increased commitments from both domestic and offshore funds, said a report by property advisory Cushman & Wakefield on Tuesday.

It was Rs.4,000 crore in the year earlier.

The residential sector attracted a significant chunk in the total investments during the period, with 56% share, followed by the commercial office sector with 41% share, while the remaining were in mixed-use developments.

The number of deals also increased by 44% to 39 during the period compared with 27 in the year-ago period. The average deal size nearly doubled to Rs.290 crore from Rs.150 crore in 2014.

The increase in real estate PE investments in the January-June period was on account of a continued increase in interest in commercial office and residential assets which nearly tripled compared to the same period a year ago, the report said.

Residential projects recorded the highest ever PE investment since 2008 as domestic funds continue to increase their exposure to residential assets. The total investment in the residential sector was recorded at Rs.6,328 crore. PE investments in commercial office assets was recorded at Rs.4,528 crore, with leased office assets such as IT Parks and IT special economic zones (SEZ) attracting significant interest from foreign investors as they continue to ramp up their portfolio of office assets.

“While PE investments in real estate sector have been rising steadily, funds are taking longer time and taking calculated risk and mainly investing in projects where there is proper clarity on cash flow. The investment trend is likely to continue upwards owing to improved macro-economic factors,” said Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield.

Chennai recorded the highest transaction volume in the first six months, with total investments of Rs.3,778 crore, with majority of the investments in commercial office assets. Mumbai came second, with investment volume of Rs.3,266 crore and Bengaluru got about Rs.1,954 crore of investments.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.