International private equity firms may have pumped in record capital into India’s real estate sector last year, but it is still just 1% of what they invested globally during the year.
India attracted $6.6 billion of inflows into the property sector as against over $610 billion global capital inflows in 2016, a JLL India study showed.
However, this is likely to change with the advent of transparency through Real Estate Regulatory Act, tax reforms and an exit avenue in the form of Real Estate Investment Trusts. The global funds that assign higher weightage to political stability, particular phase of the country’s property cycle, uptake in commercial spaces have now been reviewing Indian real estate’s potential as their key investment market.
“India’s real estate received just 1 percent of global private equity realty-focused investment and this is due to the lack of depth and highly fragmented nature of real estate sector here. While they were keen to invest more, PE funds have had to struggle with finding the right partners, and in recent times, their focus has changed to quality of partners instead of IRR (Internal Rate of Return),“ said Ramesh Nair, COO Business & International Director, JLL India.
A vibrant real estate sector with improved transparency will augur well for future fund flows.