Indian realty, it appears, owes its concrete foundations to private equity. Investment capital from uber rich individuals and institutions – or private equity (PE) financing in broadest sense of the term – now makes up 75 per cent of the funds propping up India’s property market, compared with just about a fourth in 2010. Total funding in the real-estate sector increased 40 per cent to $5.4 billion in 2016 from $3.8 billion in 2011. This includes fund flows from PEs, non-banking financial companies, banks, and the capital markets, said a Knight Frank India report.
Banks used to account for anywhere between 50 per cent-57 per cent of the sector’s institutional funding requirement until 2014. In the past two years, bank credit to the sector has slumped to about 26 per cent.
“As the real estate market in India matures, driven by both regulatory and market forces, we expect PE capital to play an even greater role. Creation of public markets for commercial assets in the form of REITs (Real Estate Investment Trusts) and sale of distressed assets by banks to reduce non-performing assets are some of the drivers that would attract a lot of foreign capital into India’s property market,” said Rajeev Bairathi, ED & head of capital markets, Knight Frank India. Overseas investors accounted for more than 70 per cent of the total private equity funding in the Indian real-estate sector during 2016, and the trend will likely continue.
