PUNE: Property exhibitions, limited period offers and discounted sales are some of the desperate efforts real estate developers have made in the last few months that make us believe that all is not well on the realty front. But private equity investors have not lost faith in the potential this sector holds as they continued to pump in money through the last year and have almost doubled their investments during January-March (first quarter) this year.
The latest report on Private Equity investments in Real Estate (PERE) by global real estate consultancy Cushman & Wakefield shows that total inflows in the sector for the first quarter of 2015 was Rs 5,168 crore - higher by 85% from Rs 2,800 crore during the same quarter a year ago.
The increase in private equity investments during the first quarter (Q1) could be attributed to improved market sentiments thanks to a very strong push from the government in creating a more conducive business environment and higher investments in residential and commercial office assets, which increased by 158% and 68% respectively compared to the same period last fiscal, the report has highlighted.
The residential sector attracted the highest transaction volumes during the quarter with a 53% share in total investment activity, the rest 47% going to the commercial/office sector.
Amid liquidity issues faced by residential developers due to subdued demand and restricted access to debt funding, private equity funds have emerged as an important alternative source to meet the funding requirements, the report said, adding that investments continue in the residential sector at the project level rather than at the entity level to protect their investments.
At the national level, Chennai recorded the highest level of transaction volume in the first quarter with investments of Rs 2,881 crore, nearly six times the investments in the same period of last fiscal. Investments in Chennai were primarily in residential assets (84%) and remaining (16%) were in commercial office assets. Delhi-NCR followed Chennai with second highest investments at Rs 926 crore. Investments in Bengaluru more than doubled (Rs 902 crore) from the previous quarter.
In the first quarter of this fiscal, residential assets recorded the second highest private equity investment since 2008. The total value of investments in the residential sector was 2.5 times more than the first quarter of last fiscal and was recorded at Rs 2,752 crore. Relatively attractive return on investments and easy exits increased focus on housing from the Narendra Modi-led BJP government and high funding needs are likely to sustain the high investments in residential assets, the report added.