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Real estate funding declined 31% in H1 2019 to $2.2 billion

Real estate funding declined 31% in H1 2019 to $2.2 billion

Real estate funding declined 31% in H1 2019 to $2.2 billion
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By Shobhit Agarwal  Jul 31, 2019 2:51:59 PM IST (Published)

The total inflows into the real estate sector saw a yearly decline of 31 percent in H1 2019 – from $3.2 billion in H1 2018 to nearly $2.2 billion in H1 2019.

A majority government at the centre is gradually reviving private equity's confidence in Indian real estate — especially the commercial sector. ANAROCK research indicates that PE players infused $ 580 million into Indian real estate in the month of June, immediately after Modi 2.0 took charge.

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That said, the general elections predictably cast a shadow on funding into Indian real estate. The total inflows into the real estate sector saw a yearly decline of 31 percent in H1 2019 – from $3.2 billion in H1 2018 to nearly $2.2 billion in H1 2019. Also, the IL&FS default last year and RBI's tightening norms for NBFC and HFC lending to real estate had a severe impact, to say the least.
Of the total funding into the sector in H1 2019:
  • Private equity inflows accounted for over $2.1 billion. In H1 2018, PE funding stood at approx $2.6 billion.
  • Funding from NBFCs/HFCs saw a 73 percent decline — from $520 million in H1 2018 to $140 million in H1 2019.
  • Of the total $2.2 billion funding in H1 2019, over 89 percent was equity funding; only 11 percent was debt. In H1 2018, equity funding had a 83 percent share while debt stood at 17 percent.
  • Mumbai attracted the maximum — 24 percent — of the overall inflows into the sector amounting to $530 million. Pune followed with nearly $250 million coming in from institutional investors — an increase of 97 percent for Mumbai’s immediate neighbour since H1 2018.
    H1 2019 Funding: Sector-wise breakup
    • 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.
    • Logistics & warehousing attracted nearly $200 million.
    • 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.
       
      Shobhit Agarwal is MD and CEO of ANAROCK Capital.
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