Wednesday, 25 February 2015

PE investment in real estate doubles in 2014

Private equity investments in real estate sector in the country registered total inflows of Rs. 15,410 crore during 2014.

This was more than double the investment of Rs. 7,360 crore recorded in 2013, according to a report by real estate consultancy Cushman & Wakefield.

This is also the highest level of investment since 2008 (Rs 17,440 crore), indicating renewed interests among domestic and foreign investors for the Indian real estate sector.

Investments in the sector for the fourth quarter was Rs. 5,480 crore, a decline of 8 per cent from the previous quarter.

The increase in investment during 2014 was due to high level of interest in leased office assets with a number of foreign investors acquiring IT parks and IT-SEZs; investment activity in under-construction projects in the residential segment also improved significantly. Leased commercial office assets with high occupancy have witnessed significant demand from investors due to the attractive yields and expected capital value appreciation.

Given the liquidity issues being faced in the residential segment as developers saw subdued sales and highly restricted access to debt funding, Private Equity (PE) funds have emerged as an important source to meet funding requirements. A few fund houses have now tweaked their strategy and are collaborating directly with residential developers (to garner higher returns), whilst a few funds are also underwriting apartments in under-construction residential projects.

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