Entity-level investments and platform-level deals became a preferred route for investing in India’s real estate market in 2015, a sign that international investors are now taking a more realistic and nuanced view of the country. According to property services firm JLL India, such partnerships are indicating an increase in investor confidence.
“The capital today that is either already in India or is coming in has a reasonable amount of buy- side experience. It has been through a learning curve already and is now selective,” explained Shobhit Agarwal, managing director for capital markets at JLL India.
This has led to a fundamental shift in how investors are approaching the country, focusing on the constitution of relationships with the local partner instead of eyeing only return on investments via one-off deals.
“In 2015, sales have been sluggish and projects haven’t had financial closure. There is need of external money, which is coming at reasonably valued equity,” he added. “People are underwriting on time and the underwriting on transactions is reasonable. Developers are building a conservative development plan because they don’t want to outpace sales.”
The latest of such deals was announced in October when Warburg Pincus tied up with the Embassy Group to jointly invest $250 million to develop industrial projects across the country. A few months earlier, the global private equity firm had also invested $284 million for a minority stake ownership in Piramal Realty, believed to be one of the largest foreign direct real estate investments in the country to date.
According to Agarwal, most of the JV and entity deals in India are being done by “patient money that doesn’t have an expiry and pressure to sell, and without a fund manager.”
He added: “This long-term capital is neutral to currency fluctuation and doesn’t need hedging. For this type of capital, it is safe as long as there are no erratic politics.”