Bangalore: Private equity (PE) investments in real estate dropped 15% in the first nine months of 2012 to Rs 3,500 crore, shows a report published by property advisory Cushman and Wakefield on Monday.
About Rs 2,100 crore or 60% of these investments were made between January and March. The number of deals dropped marginally to 23, the report said.
Property analysts said the main reason behind the drop in investments was that many funds focused on the sector had already deployed most of their money and were raising fresh capital to invest.
But Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, said the drop in deals was mainly due to concerns on government policy and uncertainty on valuations.
However, the government’s recent policy initiatives and an increase in investment opportunities in key markets--the national capital region (NCR), Mumbai, Pune, Bangalore and Chennai--should turn the tide in the coming quarter and make up for the shortfall, he said.
“Of the total Rs 3,500 crore invested, Mumbai continued to be the preferred destination for private equity investments, followed closely by Bangalore and NCR,” said Dutt.
Residential projects attracted the maximum PE capital; deals in this segment increased by 9% in the first three quarters of 2012 although the quantum of investments was similar to last year.
With company or entity level deals a rarity now, most of the deals this year were at the project level or through special purpose vehicles, the report said.
A fund manager, who didn’t wish to be named, said most realty-focused PE funds including his had deployed less capital this year. “If funds are able to raise the desired amount of capital, 2013 should see larger amount of PE money into the sector,” he said.