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Private Equity Investments Into Pune Real Estate

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Pune has been favoured destination amongst Real Estate PE funds since 2005 – the year FDI opened for real estate. Most of the funds are based out of Mumbai, which gives Pune obvious preference, as the city’s proximity allows these funds to track and monitor the market – and their investments – easily. Also, Pune is among the most rapidly growing cities in India after Mumbai, NCR and Bangalore.

The total flow of PE funds into Pune until December 2011 was approximately US$800 million. This consisted of both foreign and domestic monies through around 32 major transactions over the last five years. 2009 saw the lowest flow of private equity funds into the city, though Investors regained confidence in 2010 arrived. The renewed investor confidence resulted in a massive recovery of private equity deal closures in Pune.

As expected, most of these funds have been invested in the residential property asset class. In fact, residential real estate has proved to be the most consistent and enduring magnet for private equity funds into Pune’s real estate sector. In comparison, investments into SEZs, industrial parks (STPIT) and mixed-use townships have primarily been seen only before mid-2008. From 2010 onward, the interest in these formats as asset classes has been quite meager.

Significantly, 61% of the total private equity investments that have been seen in Pune were done in projects located in East Pune. East Pune has the majority of the city’s IT industry developments such as Magarpatta Cyber City in Hadapsar, EON IT Park in Kharadi, CommerZone in Yerawada, Weikefield IT Park on Nagar Road, etc. These IT developments have had a major spin-off effect on the profile of these areas.

The higher spending power and commensurate aspirations of the people working in these establishments has caused the arrival of massive malls and also generated a huge demand for quality residential projects. These projects are proving to be the major magnets for private equity investments into Pune’s real estate sector.

Sameer Gholve, Manager – Capital Markets, Jones Lang LaSalle India

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