The sustainability of revival in investor sentiment will depend on how soon the second wave of infection subsides and the pace of vaccination, the report said.
Indian real estate attracted private equity investments of $3,241 million across 19 deals in the first quarter of 2021 period. Of the total PE investments in real estate, the office segment attracted 71 percent share, followed by retail at 15 percent, residential and warehousing with 7 percent each, respectively, a new report by Knight Frank India titled Investments in Real Estate – Trends in PE Investment (Q1 2021 update) said.
In the first quarter of 2021, the investment in the sector has grown by 16 times compared to $199 million in Q1 2020. While Q1 2021 has been an encouraging quarter for PE investments, however, the upward trajectory can be impacted by the rising second wave of COVID-19 infections in India which started in April 2021.
The sustainability of revival in investor sentiment will therefore depend on how soon the second wave of infection subsides and the pace of vaccination, it said.
The investments in Q12021 in value terms were around 80 percent of that witnessed in full year 2020 and around 48 percent of full year 2019. The strong momentum in Q12021 was predominantly driven by two major factors: a spill over of certain deals from 2020 and the rise in investor confidence due to the drop in COVID-19 infections during early parts of Q12021, which had created some ripples of positivity in the economy.
The sustainability of this momentum in investor sentiment will therefore depend on how soon the second wave of infection subsides and also the pace of vaccination.
“The deal street market of Indian real estate witnessed an impressive surge in both value and volume of private equity investments in the first quarter of 2021, when compared to the entire year of 2020.
Office assets continue to be the preferred segment attracting over 70 percent of PE investments in Q12021 as the segment moves towards maturity which includes sustained demand, stability in rental income and change in ownership profile over the long term. Investors are expecting demand to recuperate faster as the pace of vaccination increases,” said Shishir Baijal, chairman and managing director, Knight Frank India.
The office market remained the preferred segment for investors due to the strong fundamentals (availability of large English speaking STEM talent, relatively low rentals, established knowledge outsourcing ecosystem) of the Indian office market. Since 2011, the segment has garnered $18,361 million of equity investments.
In Q12021, the segment transacted seven deals amounting to $2,148 million. Around 31.5 million sq ft of the office assets were transacted in Q12021. In terms of investor origin split for investments in Q12021, Canada led the chart with $915 million, followed by United States of America with $830 million, Singapore with $341 million and India with $62 million.
In Q12021, Bengaluru took the largest quantum of office investment (equity) worth $1,528 million with three deals, followed by Chennai – Hyderabad worth $415 million in a single deal involving assets across the two cities, Hyderabad also has $143 million from another deal and National Capital Region (NCR) with $62 million from one deal.
In Q12021, retail assets recorded PE investments of $484 million, up 120 percent from $220 million in Q1 2020. However, this jump can be attributed to a single large deal (equity) in Bengaluru between Blackstone and Prestige that involved multiple retail, office and hospitality assets as a part of the larger transaction. Since 2011, with 26 deals, the retail space has attracted $3,276 million equity investments.
In Q12021, the residential sector witnessed seven deals worth $234 million, which was 64 percent of the total investments that was witnessed during the entire 2020 and 38 percent of that in 2019. In volume terms (number of deals), the investment activity touched 100 percent of 2020 levels and 39 percent of 2019 levels. During the first quarter of 2021, Mumbai took the largest quantum of residential investment (equity + debt) worth $144 million, followed by the NCR with $55 million and Chennai by $24 million, the report said.
Source : Money Control