Private equity funds raising investments in real estate sector

NEW DELHI: Private equity funds are once again raising their investments in the Indian real estate sector but this time they are seeking more control, according to Stuart Roberts, chief executive for Asia Pacific at property advisory firm DTZ. “The market has been pruned and that is a good thing. That is why people are coming back,” Roberts said comparing the pace of PE investments in the sector with the previous years, when several funds had to write off their investments after projects failed to take off.

The market today is in a different state of maturity, he said, adding, “PE funds too are more educated about India now”. Competition for the Indian real estate has also increased since 2005 when the government began allowing foreign investments in the sector. India was earlier among the few good opportunities globally, Roberts said. But today, it is one of the many. Roberts, who joined DTZ in February, said the Narendra Modi government has managed to restore international confidence in the country.

“India was not even part of the conversation internationally in 2013. It had fallen off the map but in the last 12 months, it’s back,” he said. “Today, there isn’t a corporation in the world which doesn’t have India in its strategic plan.” This is reflected in the growth of commercial office space leasing in the country. In 2014, 35-36 million sq ft of office space was leased against an estimate of 30 million sq ft. DTZ research shows that by 2016, this figure will be closer to 45 million, which is higher than that of 2007, the last best year, when 42-43 million sq ft of office space was leased.

The challenge, however, will be the supply of office space, which got stalled post the slowdown. Even when the market picked up, most developers focused on the residential segment, putting plans for building office space on the back-burner. While that is the case currently, with a rise in pre-commitments by large corporates over the last few quarters, Roberts expects builders to re-focus on office space.