The domestic real estate sector attracted private equity investments to the tune of $5 billion (around Rs 35,630 crore) during 2019 calendar year, a marginal decline of 2% year-on-year (Y-o-Y) as investors showed little interest in the usually sought after segments like commercial and logistics and warehousing.
However, segments like retail emerged as the dark horse with investments rising almost two-fold.
According to Anarock Property Consultants, the Mumbai metropolitan region (MMR) and Delhi NCR were top favourites for PE players last year as the two regions alone accounted for close to $2.7 billion (around Rs 19,240 crore) in PE funds, a whopping 53% share in the total. The exchange rate taken is $1 equals Rs 71.25.
The retail sector was a major draw for PE funds in 2019, receiving total PE inflows of $970 million (around Rs 6,912 crore) in 2019 against $355 million in 2018 — an annual rise of more than 170%, it added.
PE inflows in NCR rose massively from around $195 million (Rs 1,389 crore) in 2018 to close to $845 million (Rs 6,020 crore) in 2019. In 2018, it was Hyderabad that was on top in the radar of private equity investors.
While MMR remained the hottest investment destination for private equity funds at $1.8 billion (Rs 12,822 crore), it was NCR that stood out in 2019. After MMR, the national capital region was the second-most attractive real estate destination for private equity players.
“The high potential of logistics and warehousing notwithstanding, this segment attracted about $200 million from PE funds, a drop of nearly 50% against the previous year,” the real estate consultancy revealed.
PE funds continued their focus on commercial real estate, pumping in more than $3.3 billion (around Rs 23,514 crore), but the inflows declined annually by 13% against 2018, it added.
“Total PE inflows in Indian real estate remained more or less the same in 2019 against 2018. However, NCR once again emerged as a major hotbed for private equity activity in 2019. Besides office real estate, the retail sector helped NCR gain traction from both foreign and domestic funds,” Anarock Capital managing director & CEO Shobhit Agarwal said.
Notably in 2019, other than commercial, the retail segment also garnered considerable attention from private equity based on the high demand for organised retail spaces across the country, he added.
“Residential saw some green shoots of revival in 2019 and this will continue in 2020 as the government’s distress funds are deployed. In sharp contrast to previous years, investors are now showing a keen interest in last-mile funding for stuck or delayed residential projects. This, along with the government support of Rs 25,000 crore for stressed projects, will go a long way in relieving residential real estate from its woes,” Agarwal noted.