Private Equity by US firms in India to decline in 2020

Private Equity from the firms based in United Stated in India is set to decline in 2020, because of the Covid 19 impact.

By Varun Singh

Private Equity which had become the go word in the real estate industry will see a decline in 2020. The reason behind this decline will be Covid 19, which has hurt the World badly.

US-based Private Equity players are the top investors in Indian real estate. These firms pumped in up to USD 5.7 bn between 2015-2019.

However, with US becoming the new epicentre of COVID-19 and thus witnessing one of its worst economic blows, the economic repercussions may soon hit India, as well.

As things stand now, US private equity funds which have been substantially active in Indian real estate since 2015 may reconsider their India investment plans, leading to a decline in total inflows in 2020.

Shobhit Agarwal, MD & CEO – ANAROCK Capital says, “India has been a major draw for US-based private equity players over the last few years. In 2019 alone, US-based firms comprised 36% share and pumped in ~ USD 1.8 bn out of the total USD 5 bn PE inflows in Indian realty. However, considering the rising pandemic fallout in the US, there is high possibility that inflows will drop significantly in 2020, thus impacting overall inflows into the country.”

The top Indian cities on their radar include Mumbai, Bangalore, Hyderabad, Pune, & Chennai among others.

Major US-based private equity players include Blackstone, Hines, Warburg Pincus, Goldman Sachs etc.

A major chunk of the US-based private equity inflows in India since 2015 focused on the lucrative commercial real estate segment, with Blackstone as the top investor.

Of the total USD 5.7 bn PE funds pumped in between 2015 to 2019, close to USD 3.5 bn (61%) targeted commercial real estate
The retail real estate segment came next, attracting nearly USD 1 bn
Residential real estate drew close to USD 500 mn, and over USD 400 mn targeted mixed-use developments
More than USD 300 mn were pumped into the logistics and warehousing sectors.

“Current estimates of the COVID-19 impact on Indian commercial real estate indicate net office space absorption across the top 7 cities will plummet by 13-30% in 2020 against preceding year, “ says Shobhit Agarwal. “This is because most multi-nationals and domestic businesses will re-strategize their expansion plans and optimize operational costs in the wake of the COVID-19 pandemic. All these factors will inevitably impact the Indian investment plans of US private equity majors as well.”