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Decline of PE Investments in Real Estate | A reality or an illusion?

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7 years ago

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Amid concerns over the decline (5 per cent YOY in FY18) in private equity (PE) investments entering India, the impact on real estate appears to be nearly four-folds higher (19 per cent YOY). While the numbers spin a gloomy picture for inflows, a detailed analysis reveals that large one-off deals such as the Hiranandani – Brookfield deal and the DLF-GIC deal skewed the numbers in FY17. Therefore, it might be incorrect to believe that PE investments in FY 18 are on a declining trend. This whitepaper is an attempt to capture the true picture of PE capital in Indian realty and looks at the quintessential question – is the decline of PE investments in real estate a reality or an illusion?
The lifeline of capital movement, PE investments in India, saw a slowdown in FY18 following the staggering growth trajectory over the recent past. While overall PE investments dropped by 5 per cent YOY, funds foraying into the real estate sector declined by significant 19 per cent YOY during this period. Investments in sectors other than realty however, held steady.Did investments into real estate actually decline?
At one glance, the decline of 19 per cent YOY in investments could reflect turbulence in the real estate sector. But when we delve deeper and dissect the flow of funds, it provides a different picture. During FY17, there have been several large ticket brownfield transactions particularly in commercial real estate covering office and retail assets (malls). For example, the $1.4 billion DLF-GIC deal and $1 billion Hiranandani-Brookfield deal which elevated the total investments for FY17. Such transactions do not happen often due to the sheer size of assets that are involved in the transactions, as those assets have a long gestation period and take more than a decade to mature and become operationally efficient.
If we look at table 2, the PE investments have been on an increasing trend since FY15 and the strong momentum which was observed in FY17 has sustained in FY18.Commercial r.e. more attractive for equity investments
The structural reforms introduced by the government over the past 2-3 years have helped the real estate sector in India to move towards a relatively transparent environment. This transformation has attracted a significant number of organised players. The process is still on and shall stabilize in short to medium term. We believe that the reforms have brought in a paradigm shift in the sector and made it more conducive for investors. Taking cognizance of these reforms, investors have invested around USD 24 billion in the form of debt and equity into real estate since FY15.
Among the asset classes, residential sector is reeling under pressure for the last 3-4 years but commercial real estate is moving from strength to strength. While the office market is maintaining its robust annual transaction volumes, retail spaces, particularly select shopping centres in tier I and II cities are catching the attention of international funds. Warehousing is one of the most promising sectors in India. The implementation of the Goods and Services Act (GST), continued government focus on building industrial corridors and the unabated growth of the Indian consumption market have whipped up the growth potential of the sector.
While the PE investments into residential asset between FY15 and FY18 were primarily in the form of structured debt courtesy inherent risk of the sector, those into commercial assets were in the form of equity. Out of $24 billion, around $10 billion (42 per cent) was in the form of equity investments into commercial assets such as prime office assets and select retail malls.
The last couple of years have seen unprecedented interest for good quality rent yielding office and retail assets in cities across India among global financial institutions such as the private equity giants, sovereign funds and wealth funds. This demand coupled with scarcity in supply of good quality assets, strong performance of the office sector, reduced interest rate regime, decline in risk expectations on account of reforms and a strong bench of long term investors did result in compression of capitalisation (cap) rate for good quality commercial assets from 9-11 per cent to 7.5-9 per cent during the last three to four years.Would the cap rate compression in commercial assets continue?
Despite the compression in cap rates, investors’ appetite for quality space seems undeterred. Investors entering the market today are expecting the cap rates to compress further up to 150 bps in the years to come. The projections are also in sync with the estimated exit time. They are hoping to get dual benefits – primarily from the growth in rental income and secondly from compression in cap rates.
On the rental front, we are optimistic about the growth prospects, as there has been a significant crunch in the supply of good quality office space across major cities in India. Vacancy rates in some of the most sought after business districts in India such as the Bandra-Kurla Complex, Lower Parel in Mumbai, Outer Ring Road in Bengaluru and DLF Cyber City in NCR have shrunk to single digit levels. These prime business districts have limited scope for substantial new supply. The supply crunch coupled with strong occupier demand has been driving up the rentals for good quality office space. With business environment in India improving and the country’s GDP growth rate expected to improve in the coming years, the occupier demand would strengthen. This would provide tailwinds for future office rental growth.
The oversupply of retail assets (malls) coupled by strata title sales of malls in India led to underperformance and closure of a large number of properties. Select retail assets which survived and were successful are witnessing strong occupier demand and rental growth. These particular retail assets are attracting investors’ attention at par with or in some cases higher than that witnessed in case for office assets. The demand is primarily driven by scope for better rental growth. Unlike office assets, which generally have a standard rental appreciation clause of 15 per cent every three years on the base rent, retail assets come with revenue sharing opportunities, in addition to the escalation on base rent. There is a significant potential for mall revenues to grow on account of the rising consumer demand and ongoing structural changes taking shape in select malls to accommodate new anchors and entertainment options in order to remain relevant against the competition from online retail. Hence, with respect to the expectation of rental growth in office and retail assets the investors would be able to achieve their desired objective.
However, with respect to expectations of cap rate compression, one needs to be cautious. Globally, the days of zero/low interest rates regimes are coming towards an end. The U.S. fed has ended its quantitative easing program and has already hiked the rates several times and has indicated of more hikes in the coming years. This has led to increase in cost of funds globally. Even in India the reducing interest rate regime prevailing for the last three years is likely to end soon and so is the case with Government Securities (G-sec) yields.
We believe that our economy is at the bottom of the current interest rate cycle and going forward the rates would start hardening. The government breaching of fiscal deficit targets currently, have already put upwards pressure on G-sec yields. Further additional factors such as expectation of higher inflation, weakened capital reserve position of banks owing to NPAs, treasury losses on bank’s G-sec holdings and the early sign of pick up in credit growth have been pushing banks to raise lending rates. With election in several states and the general election approaching, the volatility would be higher in the next two years.
While it is too early to comment on the extent of rise in lending rates and G-sec yields, in the short term they are likely to have an impact on the current trend of cap rate compression. If the rise in lending rates and G-sec goes up beyond 100-150 bps the expectation of returns from real estate investments would go up. Thus, particularly in the short-term, the case for cap rate compression would weaken and it may hold steady or increase marginally to keep the spread constant. Overall the institutional investor may have to rely more on rental growth to make up for their expected returns from their investments in the near future.
When it comes to long-term perspective, India’s macro-economic fundamentals and GDP growth outlook remain strong on the back of settling of the ongoing structural reforms and completion of mega infrastructure projects in the next five years. In turn, as the economy matures the perceived risk pertaining to invest in India is likely to come down. With the Reserve Bank of India’s continuous focus on keeping the inflation under 4 per cent and government’s efforts for fiscal consolidation, the cap rates are going to see required compression. Hence, investors with longer investment horizons like endowment funds, sovereign funds, pension funds and insurance companies would achieve returns at par with their expectations. A note of caution: unforeseen catastrophe like global financial crisis of 2007-08 should not repeat, current low intensity trade war should not exacerbate
and India should have a stable government beyond 2019.

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Concrete

Adani’s Strategic Emergence in India’s Cement Landscape

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2 weeks ago

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September 16, 2025

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Milind Khangan, Marketing Head, Vertex Market Research, sheds light on Adani’s rapid cement consolidation under its ‘One Business, One Company’ strategy while positioning it to rival UltraTech, and thus, shaping a potential duopoly in India’s booming cement market.

India is the second-largest cement-producing country in the world, following China. This expansion is being driven by tremendous public investment in the housing and infrastructure sectors. The industry is accelerating, with a boost from schemes such as PM Gati Shakti, Bharatmala, and the Vande Bharat corridors. An upsurge in affordable housing under the Pradhan Mantri Awas Yojana (PMAY) further supports this expansion. In May 2025, local cement production increased about 9 per cent from last year to about 40 million metric tonnes for the month. The combined cement capacity in India was recorded at 670 million metric tonnes in the 2025 fiscal year, according to the Cement Manufacturers’ Association (CMA). For the financial year 2026, this is set to grow by another 9 per cent.
In spite of the growing demand, the Indian cement industry is highly competitive. UltraTech Cement (Aditya Birla Group) is still the market leader with domestic installed capacity of more than 186 MTPA as on 2025. It is targeted to achieve 200 MTPA. Adani Cement recently became a major player and is now India’s second-largest cement company. It did this through aggressive consolidation, operational synergies, and scale efficiencies. Indian players in the cement industry are increasingly valuing operational efficiency and sustainability. Some of the strategies with high impact are alternative fuels and materials (AFR) adoption, green cement expansion, and digital technology investments to offset changing regulatory pressure and increasing energy prices.

Building Adani Cement brand
Vertex Market Research explains that the Adani Group is executing a comprehensive reorganisation and consolidation of its cement business under the ‘One Business, One Company’ strategy. The plan is to integrate its diversified holdings into one consolidated corporate entity named Adani Cement. The focus is on operating integration, governance streamlining, and cost reduction in its expanding cement business.
Integration roadmap and key milestones:

  • September 2022: The consolidation process started with the $6.4 billion buyout of Holcim’s majority stakes in Ambuja Cements and ACC, with Ambuja becoming the focal point of the consolidation.
  • December 2023: Bought Sanghi Industries to strengthen the firm’s presence in western India.
  • August 2024: Added Penna Cement to the portfolio, improving penetration of the southern market of India.
  • April 2025: Further holding addition in Orient Cement to 46.66 per cent by purchasing the same from CK Birla Group, becoming the promoter with control.
  • Ambuja Cements amalgamated with Adani Cement: This was sanctioned by the NCLT on 18th July 2025 with effect from April 1, 2024. This amalgamation brings in limestone reserves and fresh assets into Ambuja.
  • Subject to Sanghi and Penna merger with Ambuja: Board approvals in December 2024 with the aim to finish between September to December 2025.
  • Ambuja-ACC future integration: The latter is being contemplated as the final step towards consolidation.
  • Orient Cement: It would serve as a principal manufacturing facility following the merger.

Scale, capacity expansion and market position
In financial year-2025, Adani Cement, including Ambuja, surpassed 100 MTPA. This makes it one of the world’s top ten cement companies. Along with ACC’s operations, it is now firmly placed as India’s second-largest cement company. In FY25, the Adani group’s sales volume per annum clocked 65 million metric tonnes. Adani Group claims that it now supplies close to 30 per cent of the cement consumed in India’s homes and infrastructure as of June 2025.
The organisation is pursuing aggressive brownfield expansion:

  • By FY 2026: Reach 118 MTPA
  • By FY 2028: Target 140 MTPA

These goals will be driven by commissioning new clinker and grinding units at key sites, with civil and mechanical works underway.
As of 2024, Adani Cement had its market share pegged at around 14 to 15 per cent, with an ambition to scale this up to 20 per cent by FY?2028, emerging as a potent competitor to UltraTech’s 192?MTPA capacity (186 domestic and overseas).

Strategic advantages and competitive benefits
The consolidation simplifies decision-making by reducing legal entities, centralising oversight, and removing redundant functions. This drives compliance efficiency and transparent reporting. Using procurement power for raw materials and energy lowers costs per ton. Integrated logistics with Adani Ports and freight infrastructure has resulted in an estimated 6 per cent savings in logistics. The group aims for additional savings of INR 500 to 550 per tonne by FY 2028 by integrating green energy, using alternative fuel resources, and improving sourcing methods.

Market coverage and brand consistency
Brand integration under one strategy will provide uniform product quality and easier distribution networks. Integration with Orient Cement’s dealer base, 60 per cent of which already distributes Ambuja/ACC products, enhances outreach and responsiveness.
By having captive limestone reserves at Lakhpat (approximately 275 million tonnes) and proposed new manufacturing facilities in Raigad, Maharashtra, Adani Cement derives cost advantage, raw material security, and long-term operational robustness.

Strategic implications and risks
Consolidation at Adani Cement makes it not just a capacity leader but also an operationally agile competitor with the ability to reap digital and sustainability benefits. Its vertically integrated platform enables cost leadership, market responsiveness, and scalability.

Challenges potentially include:

  • Integration challenges across systems, corporate cultures, and plant operations
  • Regulatory sanctions for pending mergers and new capacity additions
  • Environmental clearances in environmentally sensitive areas and debt management with input price volatility

When materialised, this revolution would create a formidable Adani–UltraTech duopoly, redefining Indian cement on the basis of scale, innovation, and sustainability. India’s leading four cement players such as Adani (ACC and Ambuja), Dalmia Cement, Shree Cement, and UltraTech are expected to dominate the cement market.

Conclusion
Adani’s aggressive consolidation under the ‘One Business, One Company’ strategy signals a decisive shift in the Indian cement industry, positioning the group as a formidable challenger to UltraTech and setting the stage for a potential duopoly that could dominate the sector for years to come. By unifying operations, leveraging economies of scale, and securing vertical integration—from raw material reserves to distribution networks—Adani Cement is building both capacity and resilience, with clear advantages in cost efficiency, market reach, and sustainability. While integration complexities, regulatory hurdles, and environmental approvals remain key challenges, the scale and strategic alignment of this consolidation promise to redefine competition, pricing dynamics, and operational benchmarks in one of the world’s fastest-growing cement markets.

About the author:
Milind Khangan is the Marketing Head at Vertex Market Research and comes with over five years of experience in market research, lead generation and team management.

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Concrete

Precision in Motion: A Deep Dive into PowerBuild’s Core Gear Series

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1 month ago

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August 16, 2025

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PowerBuild’s flagship Series M, C, F, and K geared motors deliver robust, efficient, and versatile power transmission solutions for industries worldwide.

Products – M, C, F, K: At the heart of every high-performance industrial system lies the need for robust, reliable, and efficient power transmission. PowerBuild answers this need with its flagship geared motor series: M, C, F, and K. Each series is meticulously engineered to serve specific operational demands while maintaining the universal promise of durability, efficiency, and performance.
Series M – Helical Inline Geared Motors: Compact and powerful, the Series M delivers exceptional drive solutions for a broad range of applications. With power handling up to 160kW and torque capacity reaching 20,000 Nm, it is the trusted solution for industries requiring quiet operation, high efficiency, and space-saving design. Series M is available with multiple mounting and motor options, making it a versatile choice for manufacturers and OEMs globally.
Series C – Right Angled Heli-Worm Geared Motors: Combining the benefits of helical and worm gearing, the Series C is designed for right-angled power transmission. With gear ratios of up to 16,000:1 and torque capacities of up to 10,000 Nm, this series is optimal for applications demanding precision in compact spaces. Industries looking for a smooth, low-noise operation with maximum torque efficiency rely on Series C for dependable performance.
Series F – Parallel Shaft Mounted Geared Motors: Built for endurance in the most demanding environments, Series F is widely adopted in steel plants, hoists, cranes, and heavy-duty conveyors. Offering torque up to 10,000 Nm and high gear ratios up to 20,000:1, this product features an integral torque arm and diverse output configurations to meet industry-specific challenges head-on.
Series K – Right Angle Helical Bevel Geared Motors: For industries seeking high efficiency and torque-heavy performance, Series K is the answer. This right-angled geared motor series delivers torque up to 50,000 Nm, making it a preferred choice in core infrastructure sectors such as cement, power, mining, and material handling. Its flexibility in mounting and broad motor options offer engineers’ freedom in design and reliability in execution.
Together, these four series reflect PowerBuild’s commitment to excellence in mechanical power transmission. From compact inline designs to robust right-angle drives, each geared motor is a result of decades of engineering innovation, customer-focused design, and field-tested reliability. Whether the requirement is speed control, torque multiplication, or space efficiency, Radicon’s Series M, C, F, and K stand as trusted powerhouses for global industries.

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Concrete

Driving Measurable Gains

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1 month ago

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August 16, 2025

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Klüber Lubrication India’s Klübersynth GEM 4-320 N upgrades synthetic gear oil for energy efficiency.

Klüber Lubrication India has introduced a strategic upgrade for the tyre manufacturing industry by retrofitting its high-performance synthetic gear oil, Klübersynth GEM 4-320 N, into Barrel Cold Feed Extruder gearboxes. This smart substitution, requiring no hardware changes, delivered energy savings of 4-6 per cent, as validated by an internationally recognised energy audit firm under IPMVP – Option B protocols, aligned with
ISO 50015 standards.

Beyond energy efficiency, the retrofit significantly improved operational parameters:

  • Lower thermal stress on equipment
  • Extended lubricant drain intervals
  • Reduction in CO2 emissions and operational costs

These benefits position Klübersynth GEM 4-320 N as a powerful enabler of sustainability goals in line with India’s Business Responsibility and Sustainability Reporting (BRSR) guidelines and global Net Zero commitments.

Verified sustainability, zero compromise
This retrofit case illustrates that meaningful environmental impact doesn’t always require capital-intensive overhauls. Klübersynth GEM 4-320 N demonstrated high performance in demanding operating environments, offering:

  • Enhanced component protection
  • Extended oil life under high loads
  • Stable performance across fluctuating temperatures

By enabling quick wins in efficiency and sustainability without disrupting operations, Klüber reinforces its role as a trusted partner in India’s evolving industrial landscape.

Klüber wins EcoVadis Gold again
Further affirming its global leadership in responsible business practices, Klüber Lubrication has been awarded the EcoVadis Gold certification for the fourth consecutive year in 2025. This recognition places it in the top three per cent
of over 150,000 companies worldwide evaluated for environmental, ethical and sustainable procurement practices.
Klüber’s ongoing investments in R&D and product innovation reflect its commitment to providing data-backed, application-specific lubrication solutions that exceed industry expectations and support long-term sustainability goals.

A trusted industrial ally
Backed by 90+ years of tribology expertise and a global support network, Klüber Lubrication is helping customers transition toward a greener tomorrow. With Klübersynth GEM 4-320 N, tyre manufacturers can take measurable, low-risk steps to boost energy efficiency and regulatory alignment—proving that even the smallest change can spark a significant transformation.

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