According to property consultant JLL, in the next 10 years, private equity (PE) inflow in the real estate sector, is likely to grow at 10 per cent CAGR to USD 100 billion by 2026, with tier-1 and tier-2 cities being the prime beneficiaries of it. In the last 12 years (2006-2017), India has seen investments of USD 42 billion, while the next 10 years (2017-2026) is expected to see inflows to the tune of USD 58 billion, the report said.
“India’s attractiveness as a global investment destination, has been steadily rising. We have seen numerous measures that have created a positive economic environment, bringing in key factors like transparency, accountability and ease of entry into various sectors in India. This gives India a fillip in attracting capital,” JLL India CEO and country head, Ramesh Nair said. He further said these initiatives would be the key factors, for private equity to bet big on the sector in future. “We will see the floodgates open, when REITs are listed in the market. This would give the developers an option to exit or convert their holdings in to tradable stocks, through income-generating assets. Further, with the current size of the economy and its steady growth, GDP has been pegged at over seven per cent year-on-year for the next three to five years,” Nair said.
Private equity inflows for the last three years, between 2014 and 2017 in office and IT/ITeS, have risen by 150 per cent, with a strong bias towards the office sector. Although the residential sector remained the highest invested sector, the rise in the same period was just five per cent of total investment flows in pure equity, the report said. “Debt structures dominate the fund inflows in the residential sector, which is key reason for developers being overleveraged. This is on account of the general sluggishness in the residential markets and investors unwilling to take the downside risk,” the study pointed out.
With increased transparency and regulations, JLL expects a return of equity to the residential markets, in 2018. Another key insight is that except office and residential, all sectors combined add up to only 30 per cent of total investments, since 2014. “Investors are yet to explore the possibilities of new asset classes, which will show strong trends in the near future. Alternate assets classes such as retail, industrial, warehousing and alternatives, will be promising,” Nair said.
Private equity in the last few years has been concentrated in Mumbai, Bengaluru and Delhi-NCR. According to the report, Mumbai witnessed the highest percentage at 31 per cent of PE investment, followed by Delhi NCR at 27 per cent and Bengaluru at 12 per cent. The tier 2 and other markets have seen limited activities and attraction of private equity funding.