174 175
2 Private Equity Investments in Real Estate Sector
As per Cushman & Wakefield (“C&W”) research, property valuations have become increasingly attractive from 2012 onwards.
Given the stable yields and the current positive outlook of the economy, fundraising in the real estate sector has significantly
improved since 2012. Foreign investors have shown a high interest in the Indian real estate sector in 2013 and 2014, registering
a 79% and 62% share respectively in the overall capital raised in both years. Close to US$2.7 billion ( 165 billion) has been
raised in 2014, registering a 113% growth as compared to 2013.
A number of sovereign and pension funds have committed funds to Indian real estate such as All Pensions Group, Abu Dhabi
Investment Authority, Qatar Investment Authority, Canada Pension Plan Investment Board, State General Reserve Fund
of Oman, Government of Singapore Investment Corporation through fund managers such as Piramal Fund Management
(Indiareit), Xander Advisors, Kota Realty Fund, JP Morgan, ASK Advisors and even through direct agreements with local
developers to invest in projects. Although such a partnership entails higher risk due to limited diversification and higher
commitment of funds, the potential for return increases manifold. This is a clear indication that foreign funds now have
higher confidence in the Indian market.
Post the global economic slowdown in 2008, the RBI had discouraged banks from providing capital to the real estate sector.
This led to an increase in cost of capital for developer borrowing from other funding sources. To meet capital requirements,
developers are increasingly partnering with private equity funds.
As per C&W research, private equity funds have invested close to US$2.5 billion ( 154 billion) in the real estate sector in
2014, which is more than double the amount of US$1.2 billion ( 73.6 billion) invested during 2013. This substantial increase
in investments has predominantly been in under-construction residential projects followed by acquisitions of leased office
assets. The total number of deals also increased to 73 in 2014 as compared to 40 deals in 2013. While domestic fund
contributed 57% of the overall investments in 2013, foreign funds dominated in 2014 with a 74% share in overall private
equity investments.
Funds Raised by PE Firms ( billion)
Domestic
Foreign
Source: C&W Research
120
100
80
60
40
20
0
2005
2007 2008
2006
2009 2010 2011 2012 2013 2014
