JLL India Estimates Private Equity In Real Estate To Touch US$ 100 Bn By 2026
JLL India Estimates Private Equity In Real Estate To Touch US$ 100 Bn By 2026
Delhi, Mumbai and Bangalore to be the top beneficiaries of the investment trend
Tier 2 markets likely to catch up with investments in Retail and Residential
Commercial sector will be leading the investment sector
The next 10 years will attract a high amount of PE for the sector owing to some strong growth points. The estimated growth for PE in real estate will be at 10% CAGR with Tier 1 and Tier 2 cities being the prime beneficiaries of the same.
In the past 12 years (2006 – 2017) India has seen investments of US$ 42 Billion. Given the renewal of the sector with new policy changes bringing in transparency, maturity of the markets aside from the expected growth in the sector on the whole. The next 10 years (2017 – 2026) is expected to see investments to the tune of US$ 58 Billion.
Mr. Ramesh Nair, CEO & Country Head, JLL India says, “India’s attractiveness as a global investment destination has been steadily rising. We have seen numerous measures that have created a positive economic environment, bringing in key factors like transparency, accountability and ease of entry into various sectors in India. This gives India a fillip in attracting capital. This would be the key factor for Private Equity to bet big on the sector in the future. We will see the floodgates open the time REITs are listed in the market. As this would give the developers a good option to exit or convert their holdings into tradable stocks, through income generating assets. Further, with the current size of the economy and its steady growth with GDP pegged over 7% year – on – year for the next 3 – 5 years.”
| Year | PE Investment (USD million) |
| 2006 | 1,767 |
| 2007 | 8,280 |
| 2008 | 3,669 |
| 2009 | 935 |
| 2010 | 1,882 |
| 2011 | 2,243 |
| 2012 | 1,637 |
| 2013 | 911 |
| 2014 | 2,273 |
| 2015 | 4,802 |
| 2016 | 6,969 |
| 2017 | 6,400 |
Private equity inflows in for the last 3 years (2014 – 2017) in Office and IT / ITES for 2014-2017 YTD have risen by 150% where there is a strong attraction towards Office sector. Though residential sector remained the highest invested sector, the rise in the same period was a mere 5% of total investment flows in pure equity.
Debt structures dominate the fund inflows in the residential sector which is a key reason as to why developers are overleveraged. This is on account of the general sluggishness in the residential markets and investors unwilling to take the downside risk.
With increased transparency and regulations, we expect a return on equity to residential markets in 2018. Another key insight is that except office and residential, all sectors combined add up to only 30% of total investments since 2014.
Ramesh Nair further said, “Investors are yet to explore the possibilities of new asset classes which will show strong trends in the near future. Alternate assets classes such as Retail, Industrial, Warehousing and Alternatives will be promising. We expect the PE growth to be at an average rate of CARG XX% year – on – year on a wider, more diversified portfolio.”
Private Equity in the last few years has been concentrated on the cities of Mumbai, Bangalore and Delhi-NCR with Mumbai seeing the highest percentage at 31% of PE investment, followed by Delhi NCR 27% and Bangalore 12%. The tier 2 and other markets have seen limited activities and attraction of private equity funding.
| City | % of Private Equity |
| Mumbai | 31% |
| Delhi NCR | 27 % |
| Bangalore | 12% |
| Chennai | 5% |
| Hyderabad | 3% |
| Pune | 6% |
| Kolkata | 1% |
| Mixed & Others | 15 % |
| Asset Class | % of Private Equity |
| Residential & Townships | 44% |
| IT & Commercial | 27% |
| Retail | 6% |
| Entity | 8% |
| Mixed Use | 6% |
| Others | 9% |
In terms of asset classes, the highest investments have been much skewed towards residential sector which has seen a total of 44% of all private equity investment so far albeit the percentage share has reduced in the last couple of quarters.
The attraction of residential sector remains strong as the exit route is clear for this asset class. However with the changing of the investment environment, we have seen a shift in interest towards IT and Commercial recording a year on year growth, currently amounting to 27% of the total investments.
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