While real estate developers in the residential segment are finding it difficult to raise funds for their projects from most banks and financial institutions given the low demand and associated risk, the commercial segment is seeing an uptick. The real estate commercial segment that includes offices space, warehousing and so on are finding plenty of investors and financers, both in domestic as well as foreign market, who are looking for good opportunities for investment in this segment.
According to a research by ANAROCK Property Consultants, “private equity (PE) funds have pumped in nearly $3.8 billion between January to September period in 2019. Recording nearly 19% yearly gain, total inflows equalled over $3.2 billion in the corresponding period a year ago."
As much as $3.6 billion was equity funding, comprising nearly 95% overall share, while the remaining 5% came via structured debt. Out of the overall PE investment in the sector, foreign PE funds continued to dominate the real estate investment scene. Top investors included Blackstone, Hines, Ascendas, Brookefield and so on, stated the report.
Though PE investment increased in residential segment by about 40% from $210 million to $295 million during the same period, it is still too little compared to the overall PE investment of $3.8 billion in real estate sector.
“Improved transparency over the last few years, coupled with high rentals and Real Estate Investment Trusts (REITs) coming in Indian market is what is attracting global PE firms to invest in real estate sector in India," said Samantak Das, chief economist and head of research and REIS, JLL India, a real estate consultancy firm.
The demand in the office market is expected to grow strongly in the next few years. With time, this growth in commercial demand is likely to transfer into higher residential demand which augurs well for the future of the real estate market in India, added Das.