The ongoing Covid-19 crisis has taken its toll on the inflow of private equity (PE) investments in the Indian realty market. Investment activity during the first five months of CY20 has dipped 93 per cent (y-o-y) to $238 million (across just five deals with an 80 per cent drop), according to the ‘Investments in Real Estate’ report launched by Knight Frank India.
Apart from the pandemic, the report has largely attributed this decline to the slowdown in the Indian economy in 2019.
The global real estate consultancy is of the view that the sharp slowdown in the domestic economy and specifically the real estate sector will keep investors cautious. Moreover, international funds reorienting themselves to attractive opportunities in developed economies on account of a drop in valuations due to recession would cast its shadow on the PE investments in Indian real estate in 2020.
“The recall of undeployed capital by sponsors, the emergence of attractive opportunities globally, increase in risk premiums, contraction in Indian GDP and Covid-19 related uncertainties would cast its shadow on the investor sentiment and we expect the investor activity to be subdued in 2020,” says Shishir Baijal, chairman & managing director, Knight Frank India.
Baijal is of the view that of all real estate asset classes, the warehousing segment would be the fastest to recover followed by the office space. With pay cuts and job losses becoming pervasive, the residential and retail segments would have to chart an arduous journey towards recovery.
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In the slow lane. Photo credit: Sanjay Borade
