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Entity-Level PE Inflows in Indian Realty Up 17% in last 2 Years


Shobhit Agarwal, MD & CEO – ANAROCK Capital

Previously, private equity (PE) funds focused on Indian real estate were content with investments at the project-level. Now, investors’ preference is now gradually tilting towards entity-level investments. Data trends from ANAROCK’s recent report Private Equity in Indian Real Estate indicate that the share of entity-level investments is on the rise.

Project Vs Entity-Level – What’s the Difference?

Entity-level investment is an efficient strategy to get a firmer foothold in the real estate market. It allows a private equity investment firm to not only deploy its capital but also gain synergetic skills in the real estate marketplace. PE firms invariably look for high levels of corporate governance in a real estate development company before deciding to invest in it at an entity level.

Project-level investments take shorter-term view of capital deployment as they do not necessarily involve partnering with the developer over the long haul. Rather, a PE firm will invest in a developer’s project, which involves a lower commitment and is, for that reason, a less risky approach to investing in real estate.

Entity-level investments, on the other hand, involve multiple projects and require the forging long-term business alliances. They require a thorough due diligence of the entity’s financials, as opposed to project-level investments where the PE fund will primarily seek to understand the financials of an individual project.

There are well-established benefits to entity-level investments. Once a PE firm and its developer partner have established synergy, more options to deploy further funding open up. In the current cash-crunch scenario of the Indian real estate industry, this is significant as longer-term funding can help the developer address long-term issues rather than merely seek short-term solutions.


While entity-level investments by PE players come at the cost of lower returns and higher due diligence requirements, they are of greater overall value for the real estate market in general and developers and PE players in particular. An increase in entity-level investment alliances implies increasing confidence in developers with high corporate governance scores. As such, they bode well for a market which is making determined strides towards deeper organization.

Entity-Level Investments Surge

From an overall 22% share in 2015 and 2016, entity-level investments increased to a share of over 39% during 2017 and 2018. In actual value terms:

  • During 2015 and 2016, nearly USD 1.1 bn funds were pumped into Indian real estate at the entity-level
  • In the 2017-2018 period, it was nearly USD 3.3 bn.

Back in 2007, investors were investing all across – largely at the project level – as the picture looked fairly rosy then. However, post the Lehman Brothers crisis in 2008 and up to 2014, they became more selective. They refocused on select developers with good past track records, and with whom they felt ‘comfortable’.

As in any relationship, a comfort level comprises of various dynamics. With private equity players, it primarily hinges on a developer delivering consistently and factoring in their funding partners’ expectations – not just their own requirements.

Despite this new focus on comfort and credibility, PE investments remained limited largely to the individual project-level. This approach was very much in evidence in the 2015 to 2018 period, wherein approx. 2/3rd of PE investments in Indian real estate were at the project level. Of the total USD 14.01 bn PE funds in Indian real estate over the last four years, more than USD 4.4 bn were infused at the entity level.


A deep dive into data reveals that the focus on portfolio or entity-level investments picked up momentum in the latter half of the period between 2017 and 2018. In this period, entity-level private equity inflows almost tripled compared to the previous two years.

Top 3 Entity-level deals between 2015-2018

Investor Investee Deal Size in USD mn
GIC DLF 1,390
Blackstone Indiabulls Real Estate 730
CPPIB Indospace 500

Source: ANAROCK Research

For these plays, institutional investors used a combination of ‘vanilla’ and structured equity for investments into projects. That said, they found greater comfort with vanilla equity while investing at the entity level, considering the longer-term focus at the entity level, and also the limited availability of structural options while investing at this level.

The major reason for this change is that institutional investors are now looking at long-term partnerships with fruitful returns over a long period, rather than the earlier focus on short-term gains.


Commercial Real Estate Retains the Winning Hand

As anticipated, the commercial office segment accounted for the maximum share with 59% of entity-level investments over the last four years.

  • Entity-level investments in commercial real estate accounted for a mere 13% share in 2015-2016
  • Such investments increased to a share of nearly 74% during 2017 and 2018 (approx. USD 2.5 bn.)
Sectors % share of total USD 1.1 bn entity-level inflows in 2015-16 % share of total USD 3.3 bn entity-level inflows in 2017-18
Commercial 13% 74%
Logistics & Warehousing 0% 17%
Mixed Use 25% 0%
Residential 62% 4%
Retail 0% 5%

Source: ANAROCK Research

What Changed the Game?

The constant talk of these factors has, perhaps, become something of a cliché. Nevertheless, it was primarily the improved transparency brought on by a completely new regulatory approach and policy regime that turned the tide for Indian real estate. There were also far more favourable macro-economic indicators, including IMF’s forecast of India’s GDP growth rate, at play.

Thanks to these positive market signals, private equity investors once again reposed their faith in the Indian real estate sector – particularly in commercial real estate. In fact, the new sunshine sectors of logistics & warehousing as well as retail real estate attracted entity-level PE investments.


The residential sector, on the other hand, witnessed a massive decline in entity-level PE inflows – here, investors favoured investments at the project level as this mitigated their risk exposure in a very uncertain market segment.

Other Key Takeaways:

  • In the past four years, out of total USD 4.4 bn entity-level investments in real estate, the commercial segment received a 59% share, followed by residential with a 18% share, logistics & warehousing at 13%, mixed-use projects at 6% and retail at 4%.
  • Massive growth in the commercial sector – from just 13% of a total of USD 1.1 bn funds at entity level in 2015-2016 to 74% of a total of USD 3.3 bn in 2017-2018.
  • The period between 2017-2018 saw meaningful entity-level investments in the logistics & warehousing sector; entity-level investments in retail also picked up in this period (after a lull in 2015 – 2016).
  • Entity-level investments in residential real estate witnessed a sharp drop – from a 62% share to just 4%.