Monday, Jun 01, 2020 | Last Update : 11:20 AM IST

69th Day Of Lockdown

Maharashtra65168280812197 Tamil Nadu2024611313157 Delhi173877846398 Gujarat1635692321007 Rajasthan83654855184 Madhya Pradesh78914444343 Uttar Pradesh77014651213 West Bengal48131775302 Andhra Pradesh3461228960 Bihar3359120915 Karnataka292299749 Telangana2499141277 Jammu and Kashmir234190828 Punjab2197194942 Odisha17239779 Haryana172194019 Kerala120957510 Assam9361044 Uttarakhand493794 Jharkhand4621914 Chhatisgarh4471021 Chandigarh2891994 Tripura2711720 Himachal Pradesh223634 Goa70420 Manipur6060 Puducherry57230 Nagaland3600 Meghalaya27121 Arunachal Pradesh310 Mizoram110 Sikkim100

PE investors shy away from residential property

THE ASIAN AGE. | RITWIK MUKHERJEE
Published : May 4, 2019, 2:04 am IST
Updated : May 4, 2019, 2:04 am IST

In short, PE investors have been steadily drifting away from the residential sector and are increasingly focused on the commercial office segment.

Office spaces—particularly in CBD and SBD areas—have gained significant momentum over the last four years.
 Office spaces—particularly in CBD and SBD areas—have gained significant momentum over the last four years.

Kolkata: Facts first. Between January 2019 and March 2019, PE funds like HDFC Venture, Piramal Fund, Kotak Realty, JM Finance together invested Rs 182 crore in Adarsh Developers’ residential project in Bangalore, KKR invested Rs 102 crore into Embassy Group’s commercial project in Bangalore, Kotak Realty put in Rs 5.66 crore in Shriram Properties’ Kolkata residential project and IFC invested Rs 30 crore in Signature Global’s residential project in the NCR.

These encouraging facts notwithstanding, sector analysts think that country’s residential space has fallen out of favour with the PE funds for more reasons than one, the most important being uncertainties.

“The long-pending enactment of the Real Estate Regulation Act (RERA) drew clear regulatory lines for the housing market - for the very first time in India. Unregulated developers had to fall in line, step out of the game or merge with more organised players. The rebooted Benami Transactions Act closed another gaping loophole, making unregistered property purchase and ownership impossible. The application of the unified General Service Tax (GST) to replace all other previous taxes related to residential property purchase added another layer of regulation, resulting in increased complexity as well as increased cost of acquisition for most unfinished projects. While all these measures were arguably essential for the long-term viability of the Indian housing sector, they resulted in a lot of uncertainty. Private equity players are highly averse to uncertainty, so it is not surprising that the residential space has fallen out of favour with them,” said Anuj Puri, Chairman, Anarock Property Consultants.

Going by a recent study by Anarcok, between 2015 and 2018, the share of private equity investments in the residential sector reduced from 47 per cent to a mere 3 per cent. Concurrently, commercial real estate saw a significant rise in PE investments. Total private equity inflows in residential stood at $266 mn in 2018 - an 82 per cent decline since 2015.

In short, PE investors have been steadily drifting away from the residential sector and are increasingly focused on the commercial office segment. Office spaces—particularly in CBD and SBD areas—have gained significant momentum over the last four years.

Tags: hdfc venture, pe funds
ADVERTISEMENT
ADVERTISEMENT