Private Equity News: Real Estate Sector in India Plunged 5.6% to Rs 5,170 CR

The first quarter of the year highlights a disappointing private equity news for India’s real estate sector, as investments fell by 5.6 per cent to Rs 5,170 crore, according to property consultant Cushman & Wakefield. It was an entirely different story from last year’s whopping 84 per cent growth over the January-March period.

According to the firm, Chennai came in with the highest volume of PE investment at Rs 2, 880 crore, trailed by Delhi-NCR at RS 930 crore and Bengaluru at Rs 900 crore. However, the organization’s official report "Investment Marketbeat" for Q1 emphasized that 2015 PE investments declined due to 65 per cent fall in commercial office funds.

"Of 16 transactions closed in the first quarter of 2015, 15 were pertaining to residential assets totaling Rs 2,750 crore and 1 valued at Rs 2,420 crore was for commercial offices," the report explained.

The number of deals during the first three months of the year also fell to 16, compared to the previous quarter’s 22 deals. In addition, foreign funds sank at five transactions, compared to eight transactions in the earlier quarter.

Despite the plunge, the consultant remains positive about the growth and recovery of PE investments in the Indian real estate sector. "With improving macro-economic conditions, enabling policy environment, recovering demand, and increasing capital requirements of the Indian real estate sector, PE funds are likely to make significant investments in the next few years," shared C&W Executive Managing Director South Asia Sanjay Dutt.

In 2014, the sector saw a two-fold increase to Rs 15, 410 crore, and despite the lower figures highlighted during the first quarter of 2015, analysts believe that the industry is still tracking a long road ahead and there’s still enough room for progress.

According to the experts, private equity investors still go after residential and leased office assets, and that PE funds would strictly team up with only the renowned developers in the next few years, to secure their investments.

In a study conducted by Ernest & Young, other factors that will continue to challenge the real estate private equity players are the latest finance and performance reporting practices and tools and the efficiency of their funds’ tax structure. The research also found out that the real estate sector has seen an increased interest in outsourcing back-office operations in order to resolve the aforementioned concerns.

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