Indian real estate draws US$14bn foreign PE in 5 years

The Indian real estate sector attracted foreign PE investment worth more than US$14 billion between 2015 and Q3 2019, as per a report by ANAROCK, a real estate service firm

November 18, 2019

Of the foreigh PE, US$8.8 billion went to commercial real estate, US$1.5 bn to residential, US$1.7 billion to retail, and US$1 billion to logistics and warehousing

Domestic PE funds, on the other hand, have invested nearly US$2.4 billion into Indian real estate since 2015, of which 71 per cent went to the housing sector

The top five foreign investors alone contributed 75 per cent of the overall investment, and did not focus only on the top seven cities, but also on Tier II cities

Indian commercial real estate is expected to continue attracting PE funds. First three quarters of 2019 saw an increase of 43 per cent over the corresponding period in 2018

The Indian real estate sector attracted foreign PE investment of over US$14 billion between 2015 and Q3 2019, as per a report by ANAROCK, a real estate services firm. Of this, 63 per cent (US$ 8.8 billion) was focussed on commercial real estate. In the same period, the residential sector attracted US$1.5 billion of foreign PE, while the retail sector saw a cumulative inflows of US$1.7 billion. Logistics and warehousing drew over US$1 billion, and the remaining investments went into mixed-use developments.

Domestic PE funds, on the other hand, have pumped nearly US$2.4 billion into Indian real estate since 2015, of which 71 per cent went to the housing sector. However, compared to the residential sector, the commercial real estate segment has delivered a stellar performance in the last five years. Steady demand and rising rentals gave foreign investors a decisive edge. 

“Foreign investors are largely attracted towards commercial real estate because this segment has been far more organized, disciplined, documented and transparent. Even though reformatory changes within the residential real estate (like RERA, GST, etc) over the past few years are bringing in positive changes, several other issues still loom large,” said Shobhit Agarwal, MD & CEO, ANAROCK Capital.

The top five foreign investors – Blackstone, Brookfield, GIC, Ascendas, and Xander – alone contributed 75 per cent of the overall US$14 billion into Indian real estate. Their focus was not limited to the top seven Indian cities but extended into Tier-II cities such as Indore, Ahmedabad, and Amritsar.

Indian commercial real estate is expected to continue attracting PE funds as there is a high demand for Grade A office spaces across the top cities, according to ANAROCK. Earlier data indicated that the first three quarters of 2019 alone saw inflows of US$3 billion in the commercial segment – an increase of 43 per cent over the corresponding period in 2018. 

Earlier this year, Bengaluru was the first Indian city to be featured in the list of top ten destinations for cross-border investments, according to CBRE’s Asia Pacific Investor Intentions Survey 2019. India had also come up in top-five preferred markets in APAC with the launch of the first Real Estate Investment Trust (REIT). As compared with 2018, when only 2 per cent of respondents chose India as their preferred location for investments, the interest more than tripled to 7 per cent in 2019.