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Private equity (PE) investment in real estate dipped 22% to Rs.10, 080 crores in Q1FY19, although the inflow from the office sector surged by 40%. In Q1FY18 the PE investment in real estate was settled at Rs.12, 970 crores.
Private equity is the capital that is not listed on the stock exchange. Private equity comprises of funds that are directly invested in the private company by the investors. The capital for private equity is provided by Institutional and retail investors, and the capital is utilized to fund acquisitions, new technology and expand working capital.
The Private equity inflow from the office sector that is in demand from both domestic and global investors, surged to Rs. 4,300 crore during Q1FY19 from Rs.3, 090 crores in Q1FY18, an increment of 40%. The PE inflows in housing sector dipped to Rs 1,510 crore in Q1FY19 from Rs 2,290 crore in Q1FY18. Even though the PE inflows into real estate slugged by 22% to Rs 10,080 crore in Q1FY19, it was still the second highest investment in Q1FY19 in the last 11 years.
The PE inflows of Mixed-use projects saw an increment of Rs.1,850 crore in Q1FY19 from Rs. 610 crore in Q1FY18.
The retail sector observed a sharp fall from Rs 2,840 crore in the quarter ended June 2018 to Rs 1,740 crore in the quarter ended June 2019. The PE investment of Industrial sector dipped from Rs 3,760 crore in the quarter ended June 2018 to Rs 680 crore in the quarter ended June 2019.
In Q1FY19, Mumbai’s investment inflow dipped to Rs.2, 800 crores, however, the city still received the highest investments observed among the major cities. Mumbai is dominating the investment inflows with 28% share among all the major cities. Brookfield Asset Management acquired Essar Group's Equinox Business Park in Bandra Kurla Complex for Rs 2,400 crore, Mumbai’s largest transaction in Q1FY19
Real Estate Being Driven By Policies and Growing Economy:
Key policy decisions that changed the global investors’ perception of Indian real estate:
• Real Estate Regulatory Act (RERA): The implementation of RERA has caused many delays and loss of revenue to different shareholder, but it will now ensure that strong and credible developers with transparent business practices and ability to complete projects on time persist.
• The Benami Transactions (Prohibition) Amendment Act, 2016:The Benami Transactions (Prohibition) Amendment Act, 2016 is an effort by the government to intensify earlier Benami Transactions (Prohibition) Act, 1988. The Act constrains benami (literally means ‘without a name’) transactions and approves for heavy penalties on such benamidars. The Act further appreciates India’s attractiveness as an investment destination by encouraging greater transparency in ownership of property.
• Demonetisation: Demonetisation created a major deceleration in the market ,resulting in diminishing liquidity in the market. The commercial segment, land transactions, and secondary sales of homes observed an unfavorable impact. Nonetheless, over the medium and long run, demonetisation is likely to show a positive impact and high-value transactions in the real estate sector, eradicating the black money.
• GST: GST rejuvenated buyer and investor interest by bringing more transparency in taxation. The taxation system previously was convoluted for the buyers and the investors. The colossal advantage of GST is that; it is a simple and transparent tax that applies to overall purchase price.
• Other Factors that affect the global investors’ perception of Indian real estate are the status of affordable housing projects, interest subvention schemes and relaxation of norms to encourage Real Estate Investment Trust.