Realty sector hopes to see PE investment flow of 2007 level again

Mumbai, Delhi-NCR, Chennai, Bangalore and Pune received record PE Investment in 2015, as per JLL; in 2007 the sector saw $8 bn worth investments

Real estate sector has received around Rs 19,500 crore in 2015. The sector hopes for investment activities that were seen in 2007, which was the previous peak and saw an investment of more than $8 billion.

In 2016, the total investment that the sector got was around Rs 19,500 crore. Mumbai Metropolitan Region (MMR) received the maximum chunk of PE investment in real estate space followed by Delhi-NCR at and Chennai. Income-yielding office projects attracted a majority of equity investments.

Shobhit Agarwal, Managing Director - Capital Markets, JLL India, said Mumbai Metropolitan Region (MMR) received the maximum chunk of this investment at 34% followed by Delhi-NCR (29%) and Chennai (14%). Bangalore and Pune got 11% and 5% respectively. Hyderabad got 3% while all the remaining cities put together got 4% in PE investment.

 

He added, while investors remain cautious about which cities to invest in, the ratio of structured equity and debt was more than half of the total investments received.

Even for plain equity investments, core commercial assets are preferred over other asset classes.

"This reflects how investors are cautiously optimistic about the potential for major gains in the Indian real estate. Equally important for them is to invest only in projects of credible developers having a good track record," said Agarwal.

He added that while the PE focus continued to remain high on residential and office projects, entity level investments and platform-level deals came into the limelight, thus indicating an increase in investor confidence.

A total of Rs 6,048 crore worth of entity-level deals were witnessed but were limited to good developers / corporates as investors relied on previous track record before pumping in money.

Residential projects attracted considerable share of funding but equity investment in this space is still insignificant.

On the contrary, income-yielding office projects attracted a majority of equity investments. While residential and office segments will continue to attract a majority of investments, retail is expected to start seeing better traction.

Going forward, investors are expected to remain focused on the top seven cities only. In the past few months, Chinese and Japanese investors have shown interest in bringing their long-term money into India. Overall, the stage is set for a superlative show this year.

"We won't be surprised if 2016 shows a glimpse of investment activities that were seen in 2007, which was the previous peak and saw an investment of more than $ 8 billion," said Agarwal, in a statement.