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PE Real Estate investment in India Drops 62% Q-o-Q in Q1 2020

The PE investment in Indian real estate stood at Rs 16.4 billion in Q1 2020, registering a drop of 62% QoQ says a report by Colliers Research

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In Q1 2020, private equity real estate investment in India was $222 million (Rs16.4 billion), registering a drop of 62 per cent QoQ. This decline is likely due to the slowing economy and the Covid-19 outbreak says a report by Colliers Research, a leading professional real estate services and management firm.

During 2019-Q1 2020, Colliers says it witnessed $754 million (Rs56 billion) of investment inflows into hospitality real estate in India, most of it involved distressed asset trade transactions. “For comparison, this is nearly 8 times the hospitality sector investment volume recorded in the preceding five quarters. We believe these transactions have been supported by investors’ increasing confidence in the IBC 2016,” it said. The IBC enables investors to purchase the asset at an attractive valuation, without saddling them with lingering debt.

“The opportunity lies in logistics and data centres as well as core commercial office assets. Distressed assets, especially in the hospitality space, are also attractive. The opportunistic asset trade transactions is expected to gain pace in the next 2-3 years with the current economic slowdown”, says Sankey Prasad, Managing Director and Chairman at Colliers International India.

The current slowdown has resulted in reduced private equity inflows into the Indian real estate market. Considering the outbreak of Covid-19, we foresee slower decision‐making on the part of institutional investors in H1 2020, which could constrain capital deployment in India. However, Colliers noted emergence of trends in 2020 that may present several opportunities for investors that are likely to prove favourable in the long term.

“We recommend investors capitalize on the situation and focus on commercial office assets as India’s competitiveness remains. Further, lower interest rate regime is likely to compress cap rates over long term”, says Piyush Gupta, Managing Director, Capital Markets (India) at Colliers International.

Megha Maan, Senior Associate Director, Research added “the outbreak of Covid-19 and slower economic growth among other factors have altered the investment outlook for 2020. Hence, we have lowered our projection of private equity inflows in real estate to about $3.5 billion in 2020 owing to slow decision-making by investors. However, the changing market situation presents opportunities in the residential segment, income-generating core commercial office assets and opportunistic assets, especially in hospitality space”.

Colliers recommends investors consider acquiring completed residential projects as well as investing equity in under-construction residential projects with Tier 1 developers, it said in its report.

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private equity real estate COVID-19 pe investments