Private equity inflow in real estate down 85% to $866 mn in Jan-Aug: Report

The private equity (PE) inflow stood at $5,795 million in the corresponding period of the previous year

Private equity investment in Indian real estate plunged 85 per cent during January-August period of this year at USD 866 million (around Rs 6,500 crore) as investors remained cautious due to the COVID-19 pandemic, according to Colliers International and FICCI report.

The private equity (PE) inflow stood at USD 5,795 million in the corresponding period of the previous year.

Data centres segment attracted maximum investment so far this year at 46 per cent of the total inflows.

Office segment accounted for 24 per cent of the total PE investment at USD 207 million (around Rs 1,500 crore) till August of this calendar year. Industrial and warehousing share stood at 12 per cent, hospitality 9 per cent, housing 8 per cent and co-living one per cent.

"Investors, both foreign and domestic, are adopting a cautious approach to Indian real estate in the backdrop of the ongoing pandemic," said the report 'Future India: Captivating Strategic and Private Equity Investments'.

"According to Colliers International, through August 2020, overall private equity inflows into Indian real estate stood at Rs 65 billion (USD 866 million), which is just 15 per cent of the corresponding period in 2019," it added.

The report said that newer asset classes such as data centres and rental housing gained prominence among investors.

"During 2020 through August, the leading segments have been data centres, driven by demand for cloud infrastructure, as well as offices as, they tend to offer steady rental income. Robust domestic consumption also maintained investors' confidence in industrial and logistics assets," the report said.

During January-August 2019, office segment got 47 per cent of the total PE inflows that stood at USD 5,795 million. Industrial and warehousing had received 9 per cent funds, hospitality 12 per cent, housing 8 per cent, retail 18 per cent and mixed use development 6 per cent.

Colliers International advised investors to focus on data centres in order to leverage growing demand for cloud computing. It recommended them to continue to focus on the office segment to capitalise on steady rental income as well as enhanced liquidity offered by the Real Estate Investment Trusts (REITs.)

"In the backdrop of robust demand from e-commerce and other consumer-led occupiers, we recommend investors stay focused on the industrial and logistics segment in order to reap the benefits," the consultant said.

It suggested investors to consider equity investments in completed units of affordable and mid-segment residential projects. Investors should consider partnering with top-tier developers and invest in greenfield residential projects to capitalise on inherent end-user demand.

"We recommend investors consider opportunistic assets in hospitality and retail real estate segments that offer attractive valuations. We believe investors can benefit from revival in demand going forward," Colliers said.