Private equity and debt investments in India’s real estate sector jumped 12% in 2017, led by global investors such as GIC Pte Ltd, Canada Pension Plan Investment Board (CPPIB) and The Xander Group Inc.
However, debt transactions, the mainstay of residential projects, declined as cautious investors stayed away from over-leveraged developers.
With demand for capital high in 2017 as project cash flows remained, 2018 may finally see long-term, equity capital into residential projects without which it will be tough for realty firms to sustain operations in the post-Real Estate (Regulation and Development) Act regime.
Private equity and debt investments in real estate grew to $4.18 billion across 79 transactions in 2017, compared to $3.73 billion across 138 deals in 2016, according to News Corp.’s VCCEdge.
Of these, 31 were equity deals ($2.85 billion) while the remaining 48 ($1.33 billion) were debt transactions, as against 25 ($1.46 billion) and 113 ($2.26 billion) in equity and debt respectively in 2016.
Last year’s single largest transaction saw promoters of India’s biggest developer DLF Ltd selling 33.34% in its rental arm for around Rs89 billion to GIC, Singapore’s sovereign wealth fund.
Xander, which invested around Rs42.50 billion in 2017 in office, retail and debt financing, plans to grow these and expand into a few interesting operating platforms.
With high leverage levels at developers, the sector is now seeking equity, and private equity funds will start introducing equity-type products, said fund managers.
“There is a lot of capital available today but it’s only for select developers and the distinction between good and bad developers is more pronounced. But funds are realizing that they need to take more risks and do equity deals because that’s the need of the hour,” said Ambar Maheshwari, chief executive, private equity, Indiabulls Asset Management Co. Ltd.
The warehousing and logistics sector attracted more than $1 billion last year, emerging as the new hot spot for investors. CPPIB made a $500 million commitment to IndoSpace Core, a joint venture with Everstone Group. Ascendas-Singbridge Group bought six warehouses from logistics firm Arshiya for Rs5.34bn. LOGOS Group and Assetz Property Group partnered to set up a logistics and warehousing platform to invest around $400 million.