PE in real estate highest in first nine months of 2015 since 2008: report

Private equity (PE) in real estate during the first nine months of 2015 (calendar year) stood at Rs 18,300 crore ($2.4 billion), the highest since 2008.

This is an increase of 84 per cent over the corresponding period in 2014, signifying the growing confidence of PE investors in India’s real estate sector, said a new report by Cushman & Wakefield and Global Real Estate Institute.

The total number of deals in the period under review was recorded at 61, against 52 in the year-ago period. The average deal size also increased during the first three quarters of 2015 to Rs 300 crore ($47 mn), against Rs 190 crore ($30 mn) a year ago.

Nearly two-third of total PERE investments made during the first three quarters of 2015 were at special purpose vehicle (SPV) level and that too through structured debt / mezzanine route, the report said. Pure equity or entity level deals which were favourite amongst the Private Equity funds during the 2006-08, almost dried up in 2012. However, post formation of a stable, growth-oriented government in India, investor confidence has renewed and private equity funds and financial institutions have started making investments at entity level. As a result, nearly 22% of the total investments volume committed in 2015 (YTD) were at entity level.  

Foreign funds led the investment activity ($1.7 billion) with nearly 59% share in the total investment volume till YTD 2015, followed by domestic funds which had about 41% share ($1.2 bn). Majority of the foreign investment were from funds based out of Asia-Pacific region (excluding India) followed by North America.

Despite domestic funds contributing a larger number of deals (45 out of 61) in the first nine months of CY15, the foreign funds had a larger average deal size $104.7 million as compared to domestic funds’ average deal size of $26.7 mn signifying a larger appetite of foreign funds for investments.

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