Private equity inflows in India realty up 19% in FY21, portfolio deals lead

Despite the challenges thrown in by the outbreak of Covid19 pandemic, Indian real estate has recorded a 19% on-year jump in private equity investments in financial year 2020-21 at over $6.2 billion, the highest level since financial year 2015-16, showed data from Anarock Property Consultants.

Unlike earlier, 2020-21 saw private equity investors focus majorly on portfolio deals across multiple cities and assets, rather on specific projects or cities. Such portfolio deals constituted 73% of the overall share, with around $4.58 billion invested through portfolio deals in multiple cities.

The average ticket size of private equity deals rose 62% in the fiscal year–from $110 million in FY20 to $178 million in FY21. Both structured debt and equity witnessed strong growth during the year at 84% and 15% respectively. Structured debt was largely towards portfolio deals instead of project-level assets.

“Foreign funds are evidently very upbeat about India. High-grade rental-generating assets have attracted foreign investors in a big way during the year. Moreover, India has a strong underlying demand for office space with quality workforce and average rentals available at less than a dollar per sq. ft. per month,” said Shobhit Agarwal, MD & CEO – ANAROCK Capital.

Though FY21 was an unprecedented year due to the pandemic, foreign private equity funds showed much optimism for India. As much as 93% of the total private equity investments pumped into Indian real estate was by foreign investors. In actual terms, investments by foreign private equity funds almost doubled to $5.8 billion in FY21from $3 billion. In contrast, domestic funds invested merely $300 million compared to $420 million in FY20.

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According to Agarwal, alongside the successful REIT listings have provided a good monetising option for institutional investors, leading to a stronger demand for good quality rental earning office and retail assets. Good entry valuation coupled with the option to accumulate a healthy mix of portfolio assets have also driven this surge in foreign private equity investments.

During the year, private equity funds like Blackstone and Brookfield have added a lot of assets to their existing portfolios, while others have taken over loan portfolios of NBFCs.

Among other significant trends, the share of asset classes like commercial, retail and hotel has been very good. While the asset class-wise bifurcation shows lower percentage, when considered along with portfolio deals, the share of these asset classes is strong.

Nearly 66% of the total inflows of $6.27 billion in FY21 was across portfolio deals in multiple asset classes. In contrast, in FY20, out of the total $5.28 billion total inflows, just 8% of the total comprised portfolio deals.



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