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PE Inflows At $3.9 Billion In Real Estate During H1 2019: Colliers Research

Investments in commercial office assets accounted for 42% share of total investments, the report says

Photo Credit : Umesh Goswami

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During the first six months of 2019, the real estate sector witnessed private-equity (PE) inflows of USD3.9 billion (INR 27,767 crore), eclipsing the first halves of previous years, says the latest report by Colliers Research. 

This 26 per cent increase in inflows over the corresponding period last year, signals rising confidence of institutional investors in India’s Grade-A offices, retail properties and the warehousing sector, it says. Investors are scouting for investment-ready assets in core office locations in Mumbai, Delhi-NCR, Bengaluru, and Hyderabad, which together accounted for about 77 per cent of the office leasing activity in 2018, it adds. 

“The sector is at an inflection given the 3Rs - Reforms, REITs, and Results of the recently concluded elections. The year 2019 will see the bulls at play, with phenomenal capital influx in the office and logistics space”, says Suresh Castellino, Executive National Director, Capital Markets & Investment Services at Colliers International India. Colliers International is a leading global real estate services and investment management company having operations in 68 countries.

The report says that the investors have the logistics and warehousing sector under their radar. Foreign funds remain active in the real estate market, with inflows from such investors rising 28 per cent in H1 2019, it adds. While foreign funds continue to be active in the commercial office space, they are also investing into the logistics sector, it says.

Mumbai, India’s financial capital, accounted for 27 per cent of total inflows, garnering roughly USD1.05 billion (INR7288 crore) of investments, it says. "Mumbai continues to be the darling of investors, garnering the highest inflows during the first half of 2019. Most of those investments made in the city were on the project level, allowing investors lower risk and appetite. Pune also attracted notable investments during the six-month period, led by office sector, followed by residential assets and retail malls. Total investments rose tenfold to USD237 million in H1 2019," the report states.

During the first six months of the year, investments in commercial office assets accounted for 42 per cent share of total investments. Mumbai accounted for the highest share during the first half of 2019. In H1 2019, the average deal size rose 66 per cent to USD168 million, led by foreign investors, who accounted for 75 per cent of total office investments.

During H1 2019, investors pumped in USD1.2 billion (INR 8,328 crore) into the retail sector, accounting for 31% share. Investors are putting their buck behind India’s growth in malls, as 100% FDI in single-brand retail has encouraged brands to set up shop in India, despite the rapid growth of e-commerce. Foreign funds have formed partnerships as they look to grab a piece of the burgeoning Indian market.

“The year 2019 began with several large-ticket deals in the real estate sector, which is expected to continue well into the second quarter. Foreign investors are placing their bets on India, led by a strong surge in the commercial office demand, policy and reforms initiated by the government. We foresee the current year to create a new record for investments in real estate, with investors viewing retail and logistics assets favorably in addition to commercial office assets”, says Megha Maan, Senior Associate Director, Research at Colliers International India.


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