The strong momentum was driven by two major factors including a spill over of certain deals from 2020 that concluded recently and the rise in investor confidence due to the drop in COVID-19 infections during early parts of the first quarter, which had created some ripples of positivity in the economy.

Indian real estate has attracted private equity investments of $3.24 billion across 19 transactions in the quarter ended March. In the first quarter of 2021, the investment in the sector has grown 16 times compared to $199 million in the first quarter of 2020, showed data from Knight Frank India.

The investments in the March quarter, in value terms, were nearly 80% of that witnessed in full year 2020 and around 48% of full year 2019.

The strong momentum was driven by two major factors including a spill over of certain deals from 2020 that concluded recently and the rise in investor confidence due to the drop in COVID-19 infections during early parts of the first quarter, which had created some ripples of positivity in the economy.

The sustainability of this momentum in investors’ sentiments will therefore depend on how soon the second wave of infection subsides and also the pace of vaccination. Of the total private equity investments in real estate, the office segment attracted 71% share, followed by retail at 15%, residential and warehousing with 7% each respectively.

“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% of private equity investments Q1 2021 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.

According to him, while the quarter has been encouraging for PE investments, the upward trajectory can be impacted by the rising second wave of COVID-19 infections in India which started in the month of April.

The office market remained the preferred segment for investors due to the strong fundamentals of the Indian office market. Since 2011, the segment has garnered $18.36 billion of equity investments. In Q1 2021, the segment transacted seven deals amounting to $2.15 billion. Around 31.5 million sq ft of the office assets were transacted during the quarter.

“The jump in PE inflow into real estate in Q1 2021, has been a sigh of relief for the sector. The outlook for the sector had been improving with improvement in the pandemic situation in India towards the beginning of 2021. The spill over of certain deals from 2020 also helped push up the capital inflows in Q1 2021. However, with severe second wave of COVID infection in India, we will have to be cautiously watchful of the PE inflows trajectory for the next few months,” said Rajani Sinha, Chief Economist and National Director – Research, Knight Frank India.

In terms of investor origin split for investments, Canada led the chart with $915 million, followed by the US with $830 million, Singapore with $341 million and Indian domestic funds invested $62 million.

In the first quarter, Bengaluru took the largest quantum of office investment (equity) worth $1.53 billion 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.

During the quarter, retail assets recorded PE investments of $484 million, up 120% 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.

The residential sector witnessed seven deals worth $234 million, which was 64% of the total investments that was witnessed during the entire 2020 and 38% of that in 2019. The warehousing sector attracted PE investments worth $216 million which was higher by 272% on year.

https://realty.economictimes.indiatimes.com/news/industry/indian-realty-pe-investments-jump-16-times-on-year-to-3-24-billion-in-march-quarter/82086737