Private equity investment in the growing commercial sector increased by 10% compared to the previous year.

By Abhay Shah, Realty Quarter

The private equity inflows into the Indian real estate industry have strengthened, driven by a strong investment appetite for business property, primarily by the immediate exposure of foreign funding and the platform partnerships. In the Indian real estate market, private equity companies have invested more than $4.2 billion, which is 10% high compared to a year before.

However, Cushman & Wakefield data showed that investments decreased by 34.4% in the second quarter. Non-banking finance firms’ (NBFC) lending activity coming to a pause with a shortage of refinancing accessible to the housing sector led to the deceleration in quarterly cash flows.

“We expect the business sector activity, primarily the office, to continue strongly, with retail platforms and acquisitions of key retail developments on the cards as well. Warehousing/logistics through current dry powder are probable to discover powerful investor assistance and plans are being signed up by worldwide competitors,” said Anshul Jain, country head & managing director, Cushman and Wakefield India. He hopes to experience further strife in the housing sector as NBFCs grapple with liquidity troubles and expect the promoters and NBFCs to consolidate themselves. In addition, investments in the housing sector were the second-lowest in the first half of 2019 in the last five years since 2015, at Rs 5,610 crore.

The Office Segment continues a high investment objective with institutional investors raising Rs 6,280 crore, representing a 54.1% stake of the total investments in the second quarter of 2019. Investments in the first quarter of 2019 were greater by almost 37% than in the same era last year.

“The business sector remains to receive strong attention in terms of enquiries and concern for deal-making and money infusion. While rental homes and co-living are also mentioned in the likely investment talks, the warehousing and logistics industry proves to be a key factor for investors,” says Subhash Udhwani, founder of real estate-focused boutique investment bank Elysium Capital.

Strong demand for offices, low vacancies and increasing rents keep the private equity business moving. The success of the Blackstone-Embassy REIT was also the main learning to institutional investors in portfolio development, management and returns in the commercial office sector.

In the second quarter of 2019, the retail and the storage and logistics sectors attracted 12.1% and 7.9% share. Half-yearly investments in the two asset classes have increased by 21 % and 62% respectively, year-on-year basis. In an ongoing retail project in Gurugram, ADIA-backed Lakes Shore India Advisory invested Rs 1,400 crore in a pivotal deal in the retail asset class during the second quarter.

At city stage, Mumbai received the largest inflows of Rs 6,100 crore investment in the quarter, with 52.6% share of the fund’s flow. Followed by a total of 12.5% and 12.1% of the funds attracted by Pune and Delhi NCR. Multi-city investments, all in the office industry, made up 15% of the quarterly fund flows.