Private equity (PE) investment in the real estate sector rose by 16 per cent to Rs 6,010 crore in April-June period as developers raised funds to complete existing projects on account of slow sales, says a report.
According to property consultant Cushman & Wakefield, during January-April 2015 quarter, PE investment in the realty sector stood at Rs 5,170 crore.
“In the second quarter of 2015, investment activity in the real estate sector from private equity funds increased by about 16 per cent to Rs 6,010 crore,” C&W said in a report ‘Q2 2015 India Investment Market beat’.
“This is the highest quarterly investment recorded since 2008,” it added.
The consultant attributed the rise to a healthy rise in investments in the housing segment and continued inflow in yield generating leased office assets. Of the 23 transactions that were concluded during the second quarter of 2015, 18 were in residential assets worth Rs 3,580 crore (59 per cent share), followed by four deals in commercial office assets valued at Rs 2,110 crore.
“Most of the deals were done at SPV level through mezzanine financing as developers raised funds either for refinancing their existing obligations amidst a slow pace of sales in the residential sector, or for the purpose of business growth/expansion,” the report said.
Domestic funds dominated the investments during the quarter with 18 transactions with a 57 per cent share in the total volume. This was a significant jump from 18 per cent share in the previous quarter, it added.
The overall average deal size declined by 19 per cent and was noted at Rs 260 crore compared with Rs 320 crore in the first quarter of 2015.
Mumbai attracted the highest volume (52 per cent) of PE investments at Rs 3,130 crore during the second quarter of 2015, primarily in commercial office assets.
This was followed by Bengaluru (Rs 1,050 crore) and Chennai at Rs 900 crore with 18 per cent and 15 per cent shares respectively.
“Investment volume in Mumbai surged over twenty-fold over the previous quarter, while it declined in Delhi-NCR and Pune by 60 per cent and 34 per cent, respectively,” the report said.
The highest transaction by volume was noted in Mumbai in the commercial office sector at Rs 1,060 crore. During the full year 2014, PE investment in the realty sector jumped over twofold to Rs 15,410 crore.