Private Equity inflows in real estate in India rise 19% in FY2021

Private Equity inflows, PE inflows, PE investments, real estate in India, ANAROCK Capital, Flux – FY20-21 Market Monitor for Capital Flows, private equity investors, PE deals, REIT listings

In spite of the pandemic, more than $6.27 billion were pumped into the Indian real estate sector in FY2021, as against $5.8 bn in FY20 – an increase of 19% in one year – which was the highest-ever PE investments in the sector since FY16, according to ANAROCK Capital’s ‘Flux – FY20-21 Market Monitor for Capital Flows’.

Unlike earlier, FY2021 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 close to $4,583 million invested via portfolio deals in multiple cities.

The average ticket size of PE deals rose by 62% in the fiscal year – from $110 million in FY20 to $178 mn 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.

Though FY21 was an unprecedented year due to the pandemic, foreign PE funds showed much optimism for India. As much as 93% of the total PE investments pumped into Indian real estate was by foreign investors. In actual terms, investments by foreign PE funds almost doubled from $3 billon to $5.8 bn in FY21. In contrast, domestic PE funds invested merely $300 mn compared to $420 mn in FY2020.

Commenting on the same, Shobhit Agarwal, MD & CEO, ANAROCK Capital, says, “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.”

“Alongside, the successful REIT listings have provided a good monetising option for PE investors, leading to a stronger demand for good quality rental earning office and retail assets,” he adds. “Good entry valuation coupled with the option to accumulate a healthy mix of portfolio assets have also driven this surge in foreign PE investments. During the year, PE funds like Blackstone and Brookfield have added a lot of assets to their existing portfolios, while others have takeover 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 (where bifurcation is not available), the share of these assets classes is strong. Nearly 66% of the total inflows ($6.27 bn) in FY21 was across portfolio deals in multiple asset classes. In contrast, in FY20, out of the $5.28 bn total inflows, just 8% of the total comprised of portfolio deals.

The top 10 deals alone contributed nearly 78% of the total PE inflows in FY2021 as against 67% in FY2020: