Domestic private equity firms are showing a high confidence in real estate investments, driven by improved market dynamics across key property markets in the country.
A growing number of fundraising and deployment transactions by these institutional investors indicates a renewal in their interest in the market, reported Economic Times.
A revival in demand for housing, driven by a combination of factors including record-low interest rates and pandemic-induced realisation of the need for home ownership, is helping attract liquidity from these institutional investors.
“Improved residential sales momentum is helping developers get more optimistic in terms of their business activity, and they are activating new growth plans,” said Vipul Roongta, CEO at HDFC Capital Advisors, one of the largest affordable housing funds globally. “This has resulted in more demand for support from institutional investors. Funds are also keen to participate as the revival in demand after a long time ensures good returns.”
HDFC Capital has recently raised over $1. 22 billion through HDFC Capital Affordable Real Estate Fund-3 (H-CARE-3), with Abu Dhabi Investment Authority as a key investor, to invest in residential real estate, wrote The Economic Times.
The sovereign wealth fund of Abu Dhabi also acquired a 10% equity stake in HDFC Capital last week. Investments by domestic funds into India’s real estate sector have doubled in size during the just concluded financial year 2022.
Data from Anarock Property Consultants shows it has risen to $600 million in 2021-22 from $290 million in 2020-21.
The increasing confidence of domestic funds reflects the return of overall positivity after a hiatus triggered by pandemic.
“This trend will continue well into the future, especially since the RBI is restricting banks from giving funding for premiums. This provides domestic private equity funds more opportunities to fill the gap,” said Shobhit Agarwal, CEO at Anarock Capital.
Several funds, including Kotak Investment Advisors, ASK Property Investment Advisors, Motilal Oswal Real Estate, and Lumos Alternative Investment Advisors, are either raising or have raised funds to deploy in property markets.
The residential real estate sector has continued to witness steady tailwinds of accelerated consumer demand for home ownership, coinciding with near-historically low mortgage rates.
According to market experts, record low interest rates, a key factor helping the market achieve higher sales traction, may move up a bit towards the end of this year. However, that will not affect demand in a significant way, and that rise is likely to be absorbed.