NEW DELHI:  Real estate is the second most preferred sector for private equity and venture capital investments which are backed by ultra high net worth individuals (HNIs), after the e-commerce segment, according to a new report by Kotak Wealth Management called Top of the Pyramid 2015.

E-commerce grabbed the highest share of investments by private equity investors and venture capitalists with 40% and 39%, respectively, closely followed by real estate with 37% and 35%, respectively. Financial services, pharma, retail and education were the other preferred sectors for PE and VC investments.

“While the equity investments have picked up in the last financial year, there is optimism about the real estate sector among ultra HNIs,” said the report.

Sentiment of ultra HNIs towards PE and VC investments has improved. “Ultra HNIs have an inclination towards becoming a part of angel-investing groups to identify new investment opportunities,” it said.

On the other hand, the attractiveness of real estate investments has relatively decreased for the super rich over the last year, on improved outlook of returns from the equity market.

Fuelled by confidence boosting measures of the new government, the equity market has seen an increase with the BSE Sensex gaining 25% in FY15, against 18% in FY14.

Real estate has been a favoured investment asset class for HNIs for some time, however, over the last 1-2 years, there is a trend of decreasing exposure, “which is expected to continue for some time, largely due to market stagnating,” said the report.

Despite the slowdown in real estate, ultra HNIs are optimistic about the sector, with 68% respondents having a positive outlook and anticipating an improvement.


Traditionally, ultra HNIs have been large investors in real estate with the survey finding over 90% of these super rich investing in real estate. They usually consider these assets long-term investments and lower risk than other comparable asset classes and high returns. Investors expect to make about 15-20% annual return in a 3-5 year period. Investments made with a longer horizon of 10 years or more yield a return of atleast 40%.

There is also a growing trend of ultra HNIs buying entire block of apartments and row houses, to provide rental accomodation to students and corporates. “For bulk apartment purchases, during the prelaunch period, ultra HNIs expect returns of around 15-30%,” said the report.

Source : Etrealty