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PE Investments Keep High Momentum

Torbit - October 16, 2022 - - 0 |

 Investor confidence in Indian real estate is increasing steadily on the back of improvement in the Indian economy despite global headwinds. This is clearly reflected  in the continuous  robustness of  PE investments in the sector, registering an increase of 40% in 1H FY23 as compared to 1H FY22.

 
TOP 10 PE DEALS           
Top 10 PE Deals in 1H FY23   
Investor  Investee  Location  Asset Class  Deal Amount (USD Mn)  Debt or Equity   
CPPIB  TRIL  Multiple  Commercial  700  Equity   
Brookfield  Bharti Enterprises  NCR  Commercial  660  Equity   
Axis AMC  Tishman Speyer  Multiple  Commercial  188  Debt   
Capitaland Investment  Capitaland Development  Chennai  Commercial  177  Equity   
Bain capital  TARC (Anant Raj)  NCR  Residential  175  Debt   
Brookfield  IL&FS  MMR  Commercial  137  Equity   
Brookfield  L&T  Hyderabad  Land  129  Equity   
Credit Suisse  Adani Properties  Multiple  Mixed Use  101  Debt   
Varde Partners  Omaxe Group  Multiple  Mixed Use  57  Equity   
HDFC Capital  Signature Global  NCR  Residential  52  Debt   
             

The top 10 deals involving investors like CPPIB , Brookfield, Credit Suisse, Bain Capital, Capitalland Investment, Varde Partners, HDFC Capital, Axis AMC were spread across asset classes of land, residential, commercial and mixed use developments. These deals accounted for 86% of the total value of  total invesments in H1 FY 23 as compared to 80% in H1 FY 22.Geographically, these investments were made across NCR, Chennai, MMR and Hyderabad.                                                              

The average ticket size of investments has risen to USD 121 in 1H FY23 from USD 75 in 1H FY22 and USD 106 in 2H FY22. This is largely due to investors’ focus shifting more towards multi-city deals, and deployment by JV platforms. 

According to Shobhit Agarwal, MD & CEO ,ANAROCK Capital, the investment focus by PE investors in 1H & 2H FY22 was markedly strong in MMR. In 1H FY23, it has shifted to other regions.NCR witnessed a strong increase in capital inflows in PE ,   from USD 181 Mn in 1H FY22 and USD 590 M, in 2H FY22 to USD 942 Mn in 1H FY23. There was a 60% rise in investments in 1H FY23 in NCR compared to 2H FY22 due to JV platform deals like Brookfield  and Bharti Enterprises and Bain Capital and TARC. 

Equity investments in real estate have witnessed a considerable increase – 43% higher in 1H FY23 compared to same period last year. Debt funding, on the other hand, saw a 20% rise.Investors’ preference for equity is evident from the fact that the share of equity investments in Indian real estate continues to be healthy at 79% – 300 bps higher than 1H FY22. 

Post pandemic, demand and confidence in the commercial real estate sector has seen a meaningful recovery, as per  Agarwal. PE investments in this space were to the tune of  USD 1,862 Mn in 1H FY23 – almost equivalent to the investment in the whole of last year. The commercial RE space is being preferred by PE investors, as evidenced by the fact that the investment share of commercial assets in the overall real estate pie has increased from 18% and 56% in 1H FY22 and 2H FY22 to 67% in 1H FY23.” 

Demand in the residential sector has also remained healthy in post-pandemic times, resulting in the residential asset class being second-most preferred among all asset classes with USD 372 Mn being funnelled into it in 1H FY23. The PE investment figure stood at USD 378 Mn and USD 390 Mn in the first half and second half of FY23 respectively. 

The share of investments by foreign investors continued to be high at around 78% in 1H FY23, clearly reflecting the continued global confidence in India’s real estate industry. Domestic investments increased by 45% and foreign investments increased by 36% of the total capital inflows in Indian real estate in 1H FY23 compared to 1H FY22. 

Key Takeaways 

Commercial Real Estate – With many corporates moving from WFH to hybrid mode, demand and confidence in the commercial space has resurged and this is expected to continue for the next few quarters. 

Residential Real Estate – Demand in the residential sector is rising due to significantly improved homeownership sentiments amid continued WFH and hybrid work policies by many companies post the pandemic. This will continue to keep the residential space on  investor’s radar. 

Retail Real Estate – Investments in the retail space are expected to remain subdued for the next few quarters until physical shopping comes back to more promising levels. 

Industrial & Logistics – Strong e-commerce demand and buoyancy in the manufacturing sector are expected to keep strong momentum in industrial and logistics sector .

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