Private equity firms’ fund raising and investment in real estate sector is witnessing rising focus in assets classes like residential segment, unlike the earlier modus operandi of raising diversified funds, said property consultant JLL India.
“There has been a clear increase of focus among investors about where they want to invest their funds in. During 2007-08, investors left no stone unturned to participate in India’s economy and real estate growth story, and invested across all possible asset classes,” said Anuj Puri, Chairman & Country Head, JLL India. “In the same period, 66% of funds were diversified. The share of such funds has reduced to negligible levels, post-2014. In contrast, residential-focused funds have increased to 85% today from the then measly figure of 14%.”
According to Puri, these two trends show that the investment approach of investors has changed from weighing every asset class on the opportunity it presented to becoming residential-focused, as this asset class has given maximum returns over the years.
From 2014, Indian real estate has witnessed private equity investments worth $2.2 billion and this is even before taking into consideration the platform level deals worth $2 billion. “When we compare the quantum of activities in last 18 months to investments between 2009 and 2013 that were worth USD 3.9 billion, this uptick is clearly evident. Per year investment has increased by two times,” JLL India said in a report.
Apart from partnering less number of developers, investors are also focusing on fewer property markets now. In 2007-08, investors went out to close to 30 cities for deals and are now focusing on top five to eight cities.
Between 2005 and 2008, investments were not only seen across all realty asset classes but investors also invested in Tier-II and Tier-III cities. As many as 30 Indian cities enjoyed investment during this phase. Post this phase, however, the selection criteria has gotten stricter and due diligence has increased – displaying a maturing of India’s real estate PE industry.