General elections, the IL&FS default and RBI’s tightening norms for NBFC and HFC lending to real estate predictably cast a shadow on funding into Indian real estate. The sector attracted institutional funding of $2.3 billion in the first half of 2019, a decline of 31 percent year-on-year (YoY) compared to $3.2 bn in the first half of 2018, says a new report.
Private equity players have infused $580 million into the real estate market in June, immediately after Modi 2.0 took charge. Mumbai attracted the maximum (24 percent) of the overall inflows into the sector amounting to $530 million. NCR saw minimal inflows, it says.
Pune followed with nearly $250 million coming in from institutional investors – an increase of 97 percent for Mumbai’s immediate neighbour since the first half of 2018, a report by Anarock Capital said.
Commercial real estate attracted the lion’s share of investments with 64 percent amounting to over $1.4 billion, residential real estate attracted over $270 million, retail real estate attracted $260 million and logistics and warehousing attracted nearly $200 million, the report said.
Of the total funding into the sector in the first half of 2019, private equity inflows accounted for over $2.1 billion, while $140 million came in from NBFCs/HFCs. In the first half of 2018, private equity funding stood at approximately $2.6 billion and funding from NBFCs/HFCs saw a 73 percent decline – from $520 million in the first half of 2018 to $140 million in the first half of 2019, the report said.
Of the total $2.2 billion funding in the first half of 2019, over 89 percent was equity funding; only 11 percent was debt. In the first half of 2018, equity funding had 83 percent share while debt stood at 17 percent, it said.
“Even while caution prevails over the current market dynamics, the incumbent’s government proactive initiatives across sectors will doubtlessly cause more private equity inflows into the real estate sector. While Indian commercial real estate’s overall attractiveness for institutional funds is now well-established, the residential sector is also likely to become increasingly interesting in the back of the government’s determined push to affordable housing,” says Shobhit Agarwal, MD & CEO – ANAROCK Capital.