PE Inflows by US-based Firms in India to Decline
With US becoming the new epicentre of COVID-19 and thus witnessing one of its worst economic blows, 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.
However, some of the cash-rich funds could also leverage the COVID-19 fallout to optimal advantage. As and when they enter Indian shores, they will scout for good bargains and value-pick options on their own terms. Indian developers may see reduced valuations.
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.”
In retrospect, US-based private equity players pumped nearly USD 5.7 bn into Indian real estate between 2015 to 2019, accounting for a nearly 29% overall share. On a y-o-y basis, PE inflows by US firms increased from a mere USD 526 million in 2016 to over USD 1.8 bn in 2019. Concurrently, their share has also increased – from 21% to 36% during the same period.
Weak real estate and private individual houses and buildings, lower spend on PMAY-Urban given the impact on incomes, and hence spends and lower capex by government will make recover longer for cement industry.