PE investment in real estate likely to jump 30% YoY to $6 billion in 2021: Report
Private equity investments in the real estate sector are projected to revert to $ 6 billion and to see 30 percent year-over-year growth in 2021, driven by an improvement in economic sentiment aided by policy reform and growth in key emerging markets will, it says in a report.
The next wave of investment will be driven by growth in warehousing, affordable housing and data centers, aside from the commercial office segment, which will continue to improve, according to a report from Savills India, a global real estate advisory firm.
Warehousing and logistics are among the most resilient asset classes in the ongoing pandemic, according to the report, titled Beyond The 20: Private Equity in India Real Estate. Warehouse leasing is expected to increase 60 percent in 2021 compared to 2020, keeping investors tied up and looking for investment opportunities.
Savills Research predicts that private equity investors will estimate an opportunity of around $ 330 million in the industrial and warehouse segment in 2021. This is an increase of around 17 percent compared to the average annual investment in the period 2016-2020.
PE investment in real estate is projected to decrease by $ 4.6 billion in 2020 due to the decline in economic activity.
“Policy consistency and implementation will be key to revitalizing investment. We believe investors will proceed with caution in the early days, but 2021 is likely to see a decent amount of PE investment due to the inherent strengths and potential of alternative asset classes in real estate, ”said Anurag Mathur, CEO of Savills India.
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From 2000 to 2015, almost 60 percent of PE investments were in residential real estate, until from 2014 the focus of fund managers shifted to ready office assets, supported by buoyant demand, and the segment attracted around 40 percent of investments.
However, over the past two to three years there has been notable interest in newer asset classes like college dorms, data centers, warehousing, and opportunistic assets.
“For the investor community and private equity firms, the warehousing segment will become a preferred asset class in the times ahead. While leasing activities in the industrial and warehouse segment have declined compared to the previous year, we expect rents to rise steadily as the warehouse supply improves, ”said Diwakar Rana, Managing Director of Capital Markets, Savills India.
At the other end of the spectrum, retail investment was already declining in the pre-pandemic period, largely due to the increasing adoption of e-commerce by Indian consumers and the lack of world-class retail centers in major cities, the report said.
The completion of new shopping centers was reduced by almost 50 percent in 2015/19 compared to the previous five-year period.
“The government has taken steps to create a favorable business environment and to stimulate investment. Both overseas and domestic investors are revisiting some of the untapped investment areas and have restored confidence in various sectors, including real estate, ”said Arvind Nandan, General Manager of Research & Consulting at Savills India.