Real estate PE investments up 40% in Jan-March 2016

The total Private Equity investments in Real Estate (PERE) rose by 40 per cent in the first quarter of 2016 to Rs 3,840 crore ($577 million), while the total number of deals rose by 13 per cent  to 17 compared with the corresponding quarter of last year.

Unlike in the first quarter of 2015, which saw investments only in residential assets, the first quarter of 2016 witnessed investments across asset classes. Similarly, the average deal size increased by 23 per cent over Q1 2015 to Rs 2.3 billion ($34.0 million), according to a report by global real estate consultancy Cushman & Wakefield.

The quarter saw over 48 per cent share of total investment activity focussed on residential sector with about Rs 1,870 crores  ($281.0 million) of investments.

The  retail sector witnessed the second-highest investment accounting for 26 per cent of total investments in the quarter since 2008 at Rs 1,000 crores. The retail sector is seeing interest from foreign funds diversifying their investment portfolio, and some projects being on the block due to the fierce competition in the retail sector.

The commercial office sector recorded total investment of Rs 470 crore in Q1 2016, as opposed to nil in corresponding quarter of 2015. Interestingly, Hyderabad was the only city which saw investments made in commercial office sector during the quarter, with Blackstone investing in Salarpuria Sattva Group's project in Knowledge city.

"Domestic funds have continued to invest and focus primarily in residential asset class, as developers raised funds to meet their growing funding needs of working capital, construction financing and refinancing of loans. The investments are being made mostly at Special Purpose Vehicle (SPV) level, amidst slowdown in residential sales over the past 2-3 years," said Sanjay Dutt, managing director, India at Cushman & Wakefield.

"Large foreign PE funds such as Blackstone, GIC and Xander to name a few have been diversifying their investment portfolio in India and have been increasing their exposure to retail, mixed-use and hospitality sectors as well apart from investing in commercial and residential sector. This could be attributed to several opportunities arising across India wherein developers have been trying to raise capital by monetising their distressed or non-core assets to reduce the high debt levels," he added.

Mumbai gets 44 per cent
The investments in Mumbai increased 12 times from the corresponding quarter of a year ago and were spread across retail and residential assets. The city continues to garner majority of the share in total PE investments for consecutively fourth quarter as it accounted for over 44 per cent share with Rs 1,710 crore ($258.0 million) during Q1 2016.

This was followed by Hyderabad which has 19 per cent share with investments of Rs 720 crore $108.0 million) spread across office and residential assets. Delhi-NCR attracted third highest share (12.5 per cent) with inflows of Rs 480 crore ($72.0 million) spread over residential assets only.

Announced PE deals: asset class-wise- volume – (INR crores/bn)

Period

Residential

Office

Retail

Mixed-use

Q1 2016
1,870 /18.7
470 / 4.7
1,000 / 10.0
58 / 0.6
2015
18,570 /185.7
5,420 / 54.2
0 / 0.0
2,200 / 22.0
2014
6,410 / 64.1
7,490 / 74.9
300 / 3.0
690 / 6.9
2013
3,510 / 35.1
3,380 / 33.8
340 / 3.4
0 / 0.0
2012
2,850 / 28.5
3,230 / 32.3
0 / 0.0
120 / 1.2

Announced PE deals: asset class-wise- volume – (INR crores/bn)

Period

Residential

Office

Retail

Mixed-use

Q1 2016
1,870 / 18.7
470 / 4.7
1,000 / 10.0
58 / 0.6
Q4 2015
3,680 / 36.8
1,900 / 19.0
0 / 0.0
1,880 / 18.8
Q3 2015
8,560 / 85.6
0 / 0.0
0 / 0.0
0 / 0.0
Q2 2015
3,580 / 35.8
3,510 / 35.1
0 / 0.0
330 / 3.3
Q1 2015
2,750 / 27.5
0 / 0
0 / 0
0 / 0
Source: Cushman & Wakefield Research, Real Capital Analytics

Private equity investments in real estate (PERE)

Announced PE deals: city-wise Volume – (INR crores/bn)

Period
Mumbai
Delhi-NCR
Bengaluru
Pune
Chennai
Hyderabad
Q1 2016
1,710 / 17.1
480 / 4.8
160 / 1.6
60 / 0.6
220 / 2.2
720 / 7.2
2015
9,080 / 90.8
5,880 / 58.8
4,530 / 45.3
720 / 7.2
2,810 / 28.1
1,250 /12.5
2014
3,420 / 34.2
5,630 / 56.3
3,100 / 31.0
1,600 / 16.0
490 / 4.9
0.0 / 0.0
2013
1,760 / 17.6
1,550 / 15.5
2,160 / 21.6
1,460 / 14.6
30 / 0.3
0.0 / 0.0
2012
1,300 / 13.0
700 / 7.0
3,250 / 32.5
320 / 3.2
460 / 4.6
180 / 1.8
Source: Cushman & Wakefield Research, Real Capital Analytics

Recent real estte private equity deals during Q1 2016

Retail sector

Target company
Acquirer
City
Period
Value (INR crores/Mn)
Viviana Mall, Sheth Developers
GIC
Mumbai
Q1 2016
1,000 / 150.0
Source: Cushman & Wakefield Research, Real Capital Analytics

Residential sector

Target company
Acquirer
City
Period
Value (INR crores/Mn)
Aristo Realtors
IIFL
Mumbai
Q1 2016
500 / 5.0
IDB Group JV ELCO Holdings Ltd
Peninsula Brookfield Investment Managers JV Incor Infrastructure
Hyderabad
Q1 2016
250 / 2.5
Arun Excello
Piramal Fund
Chennai
Q1 2016
220 / 2.2
Sunteck Realty
KKR India Asset Finance
Mumbai
Q1 2016
150 / 1.5
Source: Cushman & Wakefield Research, Real Capital Analytics

Office sector

Target company
Acquirer
City
Period
Value (INR crores/Mn)
Salarpuria Sattva Group
Blackstone
Hyderabad
Q1 2016
470 / 4.7
Source: Cushman & Wakefield Research, Real Capital Analytics

Note: Exchange Rate: Q1 2015: USD 1 = INR 62.28; Q2 2015: USD 1 = INR 63.61; Q3 2015: USD 1 = INR 66.07; Q4 2015: USD 1 = INR 66.05, Q1 2016: USD 1 = INR 66.50