Private equity (PE) funds committed $2.8 billion to Indian real estate projects in the first nine months of 2015, global real estate consultancy firm Cushman & Wakefield and Global Real Estate Institute said in a report released on Wednesday. The funds invested across 61 deals between January and September, against $1.63 billion across 52 deals during the same period last year.
Apart from the increase in deal activity, the average transaction size too increased to $47 million, from $30 million during the same period last year.
The report adds that around two-third of the allocated capital was invested through structured debt and mezzanine debt route. Pure equity or entity-level deals that had dried up by 2012 have started to make a comeback, with 22% of the capital going into these deals.
“Of late, we are seeing PE fund managers investing through preferred equity and structured equity as they expect better returns through this route than through debt investments. Over the next 12 months, we expect more such deals in the country,” said Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield.
The investments have been led by foreign funds that have committed $1.6 billion, or nearly 59% share of the total investment volume so far in 2015, followed by domestic funds that have invested around $1.2 billion. The majority of foreign capital that has been invested were from funds in the Asia-Pacific region (excluding India) followed by North America.
Interestingly, among this year’s 61 deals, 45 deals totalling $1.2 billion were struck by domestic funds, while foreign capital chased only 16 assets. Even though residential project sales have lagged in Mumbai, nearly 40% of the invested capital this year was deployed in this region, followed by the Delhi-National Capital Region (NCR). Fund managers invested 78% of their capital in these two cities.
The residential sector drew a most of the capital though a few big deals were closed in the commercial segment by foreign investors. Total PE investment volume in the residential segment increased three-fold from the corresponding period last year.
“There has also been a return of some bluechip investors wo had withdrawn a few years back, re-entering the Indian real estate market with some direct investments. A number of Chinese investors have also been showing some strong interest in the country,” Dutt added.