Foreign private equity firms invested around $14 billion during the period starting 2015 to the quarter ended September of 2019, with most of the investments in the commercial real estate sector, says a data report by Anarock Capital.
“This was a period of considerable stress for the residential segment; domestic funds invested heavily into a sector plagued by issues like delayed or stalled units, low sales and fairly lower yields. This made exiting investments with substantial gains difficult,” Anarock Capital said in a statement. It observed that the commercial real estate segment, on the other hand, delivered a comparatively stellar performance in the last five years. Steady demand and rising rentals gave foreign investors a decisive edge.
“Moreover, the overwhelming response to Embassy Office Parks’ REIT launch - and its superlative performance - saw commercial real estate segment emerge as the bigger draw for investors. Several other large developers are also keen on listing their commercial assets under REITs,” it said. Of the total $14 billion foreign investments in Indian real estate between 2015 and Q3 2019, logistics and warehousing drew over $1 billion, and the remaining investments went into mixed-use developments.
The top five foreign investors -- Blackstone, Brookfield, GIC, Ascendas and Xander -- contributed 75 per cent of the overall $14 billion into Indian real estate. Their focus was not limited to the top seven cities and extended into tier-II cities like Indore, Ahmedabad and Amritsar as well, as per the data. Motilal Oswal, HDFC Venture, Kotak Realty, ASK Group and Aditya Birla PE, were the top five domestic investors with nearly 54 per cent investment of around $1.3 billion into the Indian real estate and they focused exclusively on the top seven cities, Anarock Capital said.
Further, during the first three quarters of 2019, the residential segment drew around $295 million private equity funding against $210 million in the corresponding period last year. Though this constitutes an impressive 40 per cent annual gain, investments are still far below the 2015 peak levels of 2015, when housing drew PE investments of around $1.5 billion, the data adds.