Private equity inflows in real estate sector rose 26 percent to $3.9 billion in the first half of 2019, signalling the rising confidence of institutional investors in India’s grade A offices, retail properties and the warehousing sector, as per a new report.
Investors are scouting for investment-ready assets in core office locations in Mumbai, Delhi-NCR, Bengaluru, and Hyderabad, which together accounted for about 77 percent of the office leasing activity in 2018, said the report by Colliers Research.
Mumbai, India’s financial capital, accounted for 27 percent of total inflows, garnering roughly $1.05 billion of investments. 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 $237 million in the first half of 2019, the report said.
During the first six months of the year, investments in commercial office assets accounted for 42 percent share of total investments. Mumbai accounted for the highest share during the first half of 2019. In the first half of 2019, the average deal size rose 66 percent to $168 million, led by foreign investors, who accounted for 75 percent of total office investments.
During the first half of 2019, investors pumped in $1.2 billion into the retail sector, accounting for 31 percent share. Investors are putting their buck behind India’s growth in malls, as 100 percent 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 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,” said Suresh Castellino, Executive National Director, Capital Markets & Investment Services at Colliers International India.
“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,” said Megha Maan, Senior Associate Director, Research at Colliers International India.