S ingapore investors are betting big on Indian commercial real estate and other new sunshine sectors, including logistics and warehousing. Major Singapore-based private equity firms are funnelling billions of dollars into the country's real estate sector, particularly in South Indian cities.
As per ANAROCK's recent report Private Equity in Indian Real Estate , of the total $14.01 billion PE funds pumped into Indian realty between 2015 to 2018, approximately one-third were invested by Singapore-based firms during the period — the highest among both domestic and foreign investors. However, of the total PE inflow of $1.1 billion in Q1 2019, there were no investments from any of the Singapore-based PE investors such as GIC, Ascendas and Xander.
With funding from banks and NBFCs drying up over the last few years, Indian developers were being forced to explore debt and equity funding from various private equity players. Singapore investors were on top of the list, followed by PE players from US and Canada. After establishing a strong base in China, India was their logical next destination of preference.
In fact, with their more patient and long-term outlook, Singapore-based investors and developers have gained a substantial foothold in India’s property market over the last four years. In in 2015 and 2016, Singapore-based PE players pumped $1.15 billion into Indian real estate. This saw a three-fold jump in 2017 and 2018 — to nearly $3.5 billion.
Major players including GIC, Ascendas-Singbridge and Xander have been making steady investments into India. However, in recent years they have scaled up their investments and developments across segments. Besides commercial spaces including office and retail, players like Ascendas are also diversifying their portfolios and eyeing sunshine sectors like logistics and warehousing.
Steady demand environment along with increased absorption of office space has prompted South region to gain momentum in 2018 with overall investments being tripled — from nearly $755 million in 2017 to $2.24 billion in 2018.
Bengaluru, Chennai and Hyderabad together comprised 54% overall share of PE inflows in 2018. While Mumbai in west continued to be the most preferred city for investments with 38% of the total capital inflow, Hyderabad witnessed a sudden burst in investments in 2018, contributing more than half of investments received by Southern India.
With regards to Singapore-based investors over the past four years, GIC has invested close to $2.5 billion in overall Indian real estate, mainly in cities like Mumbai, Chennai, Bengaluru, Hyderabad and NCR. For Ascendas, the preferred cities have largely been Hyderabad, followed by Chennai and MMR.
While US-based investors, led by Blackstone, have largely invested in West Indian markets (including Mumbai and Pune), Singapore-based investors focused on strengthening their foothold in South Indian markets of Bangalore, Hyderabad and Chennai.
The city saw total PE inflow of $1.7 billion in the last four years, out of which Singapore investors alone pumped in approx. $930 million. Interestingly, Japanese conglomerate Mitsubishi Corp also invested nearly $25 million in a residential project by Shriram Properties — Shriram Park 23 in Southern Chennai — in 2018. This equity investment marked Mitsubishi’s entry into the Indian real estate sector.
Hyderabad saw a total PE inflow of nearly $1.5 billion over the last four years (2015-2018). Of this total, nearly $875 million came from Singapore-based PE investors including Ascendas, Xander and GIC. Between 2017 and 2018, the overall PE funds from these companies touched over $750 million. Out of all Singapore-based investors, Ascendas has shown maximum interest in Hyderabad, specifically in commercial real estate. GIC invested nearly $77 million in 2015 in ICICI Venture’s Waverock project.
Increased office leasing activity in the last few years has positioned Hyderabad as one of the most active commercial markets in the South, backed by supportive Government policies and strong political stability. The city also offers the lowest office rentals in comparison to top Southern markets of Bengaluru and Chennai.
So far, in Q1 2019, Hyderabad saw an investment of around $44 million by UAE-based company Lakeshore into the city’s retail.
The Garden City saw nearly $420 million pumped into its real estate sector in 2018 across commercial, logistics and warehousing, and retail. This was a 112% increase against the total PE inflows in 2015 when it was merely $197 million. Collectively, in the last four years the city has seen $1.13 billion inflow including new emerging sectors like student housing and also affordable housing. For instance, Wall Street giant Goldman Sachs invested nearly $44 million in a student housing project of Yoho — the student living business of Manipal Education and Medical Group.
In Q1 2019, Bengaluru saw inflow of $4 million by Indospace group in Orris Infrastructure.
From the USA
US-based investors pumped in nearly $4.0 billion in the same period (2015 to 2018) and more than $700 million in the first three months of 2019. From the leading US-based private equity players including Blackstone, Goldman Sachs, Hines, Warburg Pincus and Proprium Capital, Blackstone alone infused nearly $2.9 billion across Indian cities over the last four years.
PE players from Canada, led by Brookefield, were the third-largest investors into Indian real estate over the last four years, with PE infusions close to $2.3 billion. The other major PE player active in India is Canada-based pension fund CPPIB.
The writer is MD and CEO, Anarock Capital