Investments in the real estate sector grew by 53% in the first three quarters of calendar 2013 with an infusion of $1,885 million against $1,235 million during the same period in the previous year.
The increase is primarily attributed to the surge in the investments from the private equity market, according to analysts. The majority of the investments was in the commercial segment.
“It seems that India is presently poised to catch up with this trend with the possibility of Indian REITs taking off, and India’s core commercial assets yielding comparatively high rentals among emerging markets. This has led to large global as well as domestic investment firms being attracted to large office space portfolios,” said Gaurav Kumar, co- head, capital markets at CBRE South Asia.
“This time, the commercial assets which saw investment were not the new constructions but they are the high income yielding assets where the aggregation risk is minimal but have advantages of guaranteed healthy returns. This segment has attracted significant focus because of its stable rental yields and low risk profile,” Kumar said.
Analysts like Rajeev Bairathi, executive director, capital transactions & north at Knight Frank, said that the PE investments in the commercial real estate segment would increase, over the next 12 months at least.
“Approximately 45–50% of the amounts raised over the last two years has been invested to date. But, by the second and third quarter of 2014, most of the remaining amounts are also expected to get invested,” Shobhit Agarwal, managing director (capital markets), Jones Lang LaSalle India, said.
If one looks at who are the major investors during this period, the most active players in the real estate segment include Blackstone, Ascendas Trust, Indiareit and Xander.
Asked about the preferred locations, experts like Jones Lang LaSalle India, Knight Frank, Cushman & Wakefield and DTZ rate Bangalore, Mumbai, Pune and NCR as the most attractive destinations for the investments. This is because these cities generate the bulk of employment in the country.
“It follows naturally that the demand for commercial and residential real estate is also the highest in these cities. Automatically, whatever finance for real estate is now available is almost exclusively focused on Mumbai, Delhi and Bangalore. Pune is also notable, if not in magnitude of investments, then certainly in the consistency of interest in this city by funds,” Agarwal said.
Anuj Nangpal, managing director, investor services, DTZ, said, “Some of the most active players in the real estate segment includes Blackstone, Ascendas Trust, Indiareit and Xander.