REITs effect on PE inflow in real estate: Private Equity investment in residential realty at 4-year low

On account of 82 per cent decline in the Private Equity (PE) investment in the residential realty of India since 2015, the PE inflow in residential realty has slid to its 4-year low. Industry insiders say PE investors have started to invest in the commercial properties and after the launch of Real Estate Investment Trust (REIT), the trend would further worsen for residential real estate property in regard to PE inflow. The commercial office segment saw the highest inflows, accounting for a massive 70 per cent share of the total institutional investments into the industry in 2018. Retail real estate came in a distant second with 7 per cent, and the residential sector drew the least private equity among the three sectors, with less than 7 per cent of the overall share in the year 2018.

Speaking on the matter Shobhit Agarwal, MD & CEO at ANAROCK Capital told Zee Business online in a written statement, "Due to multiple issues like stalled or delayed projects, the liquidity crunch, high property values and low sales, the residential real estate sector has been shedding PE investors' interest. Between 2015 and 2018, equity investments into the sector reduced from 47 per cent to a mere 3 per cent. However, the affordable housing segment is gaining momentum and investors will seek to secure a slice of this increasingly lucrative pie."

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Standing in sync with ANAROCK Capital views Rakesh Yadav, CMD at Antriksh India Group said, "Considering high demand, fund exits have been relatively easier in commercial real estate - and with REITs being launched, the residential real estate projects are expected to further go down in PE investor's priority of investment," adding, "Total private equity inflows in residential at $266 mn in 2018 - an 82 per cent decline since 2015."