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Realty attracts $14 billion foreign PE investments since 2015: Report

Indian real estate attracted nearly $14 billion of foreign private equity between 2015 and 2019.

, ET Bureau|
Nov 18, 2019, 12.42 PM IST
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The residential sector attracted $1.5 billion of foreign private equity in the same period, trailing behind even the retail sector which saw cumulative inflows of $1.7 billion.
Foreign institutional investors have shown more confidence in Indian real estate, especially commercial real estate over the past five years, while domestic investors continued to invest largely in the residential space.

Indian real estate attracted nearly $14 billion of foreign private equity between 2015 and September 2019, showed data from ANAROCK Capital. Around 63 per cent or $ 8.8 billion of this inflow of the total foreign investments backed commercial real estate. The residential sector attracted $1.5 billion of foreign private equity in the same period, trailing behind even the retail sector which saw cumulative inflows of $1.7 billion.

“Foreign investors are largely attracted towards commercial real estate because this segment has been far more organized, disciplined, documented and transparent. Also, the returns on investments in commercial are fairly steady. Even though reformatory changes within the residential real estate (like RERA, GST, etc.,) over the past few years are bringing in positive changes, several other issues still loom large. Hence, commercial reale state seems to be a safer bet for them,” said Shobhit Agarwal, MD & CEO, Anarock Capital.

In contrast, domestic private equity funds infused nearly $2.4 billion into Indian real estate since 2015, of which nearly 71 per cent or $1.7 billion went to the housing sector. This was a period of considerable stress for the residential segment; domestic funds invested heavily into a sector plagued by issues like delayed/stalled units, low sales and fairly lower yields. This made exiting investments with substantial gains difficult.

The commercial real estate segment, on the other hand, delivered a comparatively stellar performance in the last five years. Steady demand and rising rentals gave foreign investors a decisive edge.

An additional infusion of $1.6 billion between 2015 and September 2019 was a mix of foreign private equity and funding by Indian developers or investors who collaborated either at project or entity levels.

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