2016 will see more PE investment in real estate
2016 will see more PE investment in real estate
After the government eased foreign direct investment norms for the sector in 2015, Real estate companies are expected to raise more money from private equity funds this year. An estimated $4.8-billion was pumped into the realty sector via the PE route last year and according to experts, fund infusion in 2016 will well surpass this figure.
Real estate focussed funds propose to raise anywhere between $3 billion and $4 billion of private equity. However, the way these investments would be carried out in 2016 may differ from what has been happening in past few years. In 2015, a large part of the investment in real estate was debt or structured transactions. This is expected to continue in 2016, but it would be complemented by equity deals in the latter half of 2016.
According to Rajarshi Datta, asset management lead, Acquisory Consulting, “Taking an average investment cycle of eight years, these funds will have to deploy all the money in next four years, which means at least $1 billion will have to be invested in 2016.” Experts say the additional $1 billion that could be invested in the sector is over and above investments made by PE firms which are already sitting on funds.
Industry trackers say at least $1 billion will be raised in the first three months of 2016, which would be invested in the same year. Data obtained from venture intelligence notes that about $2.94 billion (Rs 19,420 crore) have already been raised by some real estate focussed funds.
Analysts say that both residential projects as well as corporate real estate will witness inundation of funds. While the residential segment will see consistent cash flows, the corporate sector will get an opportunity to optimise rentals for investors. However, prices of real estate may not get impacted across the spectrum; movement will be seen only in select pockets like NCR, Mumbai and Bangaluru.
