Private equity investments of $3 billion have been made in Indian real estate in the first half of 2024, an increase of 15 per cent on year from $2.6 billion year ago, a report by Knight Frank India said.

Warehousing sector accounted for largest share at 52 per cent of total PE investments in the period under review, followed by residential (29 per cent) and office (20 per cent). PE investments in the residential sector also saw a significant increase of over 3 times to $854 million.

There was shift in investor dynamics and sectoral preferences for private equity investments in Indian real estate sector, the report pointed out. The office sector, which has received the highest share of PE investments since 2018, was surpassed by the warehousing sector, which has become the most popular now, attracting more investments than the combined totals of the office, retail, and residential sectors.

On an overall basis Mumbai received the most investments at $1.7 billion from $1.24 billion year ago. Flows to the residential segment in the city was to the tune of $201 million.

Bengaluru received around a fifth of the total investments, at $581 million. Around 69 per cent of these investments were dedicated towards the residential sector. The remaining 31 per cent were invested in office sector.

“Indian commercial real estate continues to thrive due to factors like return to work, rising office absorption and strengthening rental values,” Knight Frank India CMD Shishir Baijal. “Similarly, a year on year strengthening of residential market and continued consumer activities in retail further bolstered by economic growth has incentivised funds to adopt a long-term perspective towards investment in real estate.”

Warehousing

Investments in the warehousing segment showed a significant upward trajectory in H1 2024, reaching $1.53 billion, a steep rise of 176 per cent on year, driven by a single deal that accounted for the bulk of it. Mumbai and Chennai were the primary beneficiaries, attracting $1.5 billion and $32.3 million respectively in the warehousing segment.

According to the report PE investors are actively engaged in the warehousing market, particularly targeting subsectors such as e-commerce, logistics, and third-party logistics facilities. “Warehousing sector is experiencing robust growth due to the burgeoning e-commerce industry and an increasing focus of the companies on supply chain optimisation,” Knight Frank said.

The inherent demand for warehousing due to growing consumerism and manufacturing coupled with supportive government policies and growing demand from various industries, make it a compelling proposition for PE investors, it added.

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