How precious is Indian property? What buyers should know about this rising trend
High occupancy levels, relatively lower rentals in dollar terms, etc. are the key reasons for commercial space to draw around 70% of the total PE investments in 2018.
On account of high occupancy levels, relatively lower rentals in dollar terms, quality Grade A assets and high-quality tenants, commercial real estate in India lured a lion’s share with $2.8 bn in PE (private equity) funds in 2018, which is highest in last four years. Industry insiders say the trend is expected to remain on the higher side as the segment has already drawn $1 bn in less than three months in 2019.
Shobhit Agarwal, MD & CEO at ANAROCK Capital told Zee Business online, "A segment-wise breakdown indicates that commercial realty saw an annual increase of 27 per cent in PE investments – from nearly $2.2 bn in 2017 to over $2.8 billion in 2018."
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"High occupancy levels, relatively lower rentals in dollar terms, quality Grade A assets and high-quality tenants are the key reasons for commercial space to draw around 70 per cent of the overall share of the total PE investments in 2018. Considering high demand, fund exits have been relatively easier in commercial real estate - and with REITs being launched, they will become even easier," said Agarwal of ANAROCK Capital.
Standing in sync with ANAROCK views Rakesh Yadav, CMD at Antriksh India Group said, “In the current market scenario, funding is a major problem for the Indian real estate – especially post IL&FS crisis leading to the NBFC crisis. PE funding is the best alternative for developers who qualify for it. Despite a decline of 9 per cent in PE inflows in 2018 against the preceding year, 2019 will bring a marked increase in private equity funding because of India’s first REIT listing."
Yadav said that from this point onward, commercial real estate - especially Grade A office spaces - will attract considerable investments. "Nevertheless, much of the industry's prospects also hinge on the outcome of the upcoming general elections. Institutional investors will continue to pump in funds into the real estate industry if they can rely on political stability, proactive policies and a favourable microeconomic environment,” said Rakesh Yadav of Anrriksh India.