PE INVESTORS BET BIG ON INDIAN REAL ESTATE

Indian real estate sector growing at a CAGR of 18 percent, is set to reach the market size of USD 1000 billion by 2030,offering a huge opportunity to foreign investors. Seeing this high potential, private equity investors are betting big on Indian real estate.

The Indian real estate sector has been fuelled by private equity investors for many years. The much-needed capital for many developments came from India-dedicated as well as foreign investors. A quick assessment of the past six years’ private equity deals in the Indian real estate sector by Anarock reveals that 42% of investments were attracted by the West India region.

According to Anuj Puri, Chairman, Anarock, the presence of large cities such as MMR and Pune, which are witnessing massive real estate developments, is a key reason for this region attracting such a significant share of the private equity investments.

In addition to the geographic spread and real estate developments in the West India region, one of the key reasons for significant private equity investments coming in here is the presence of large organized corporate developers. Of the residential real estate’s  new launches across the top 7 cities, 46% happened in the West India region for the period 2016 to 2021.

Private equity investors’ focus on adherence to best practices, good corporate governance, and transparency and accountability in operations is extremely high, and many of the large developers in the West India region abide by these requirements.

This is primarily because of the successful implementation of RERA in Maharashtra. The state has been a front-runner in RERA implementation, encouraging more developers here to comply with its norms. Moreover, the West India region already had a fair presence of listed and large corporate developers known for implementing best practices even before RERA.

West India appears to be the hot favourite with private equity investors. Considering the scale of developments by organized developers here, this trend is likely to continue.

That said, private equity investors’ evaluation criteria, norms, and stringent focus on global best practices are constantly increasing. Any complacency on these fronts will come at a steep cost – the battle for preferential PE funding will continue to be sharply fought among leading developers from all parts of the country.