India’s real estate sector recorded a steep decline in private equity investment during the first quarter of 2023 with only $0.05 billion (or ₹370 crore) worth of investment, marking a staggering 95 per cent drop from the $1 billion invested during the same period in 2022.
Investment activity has been subdued due to growing global recession concerns, rising capital costs, and a mismatch in valuation expectations between sellers and investors, which have become significant hindrances to capital deployment in India, Savills’ report noted.
Furthermore, recent events in the global financial world, including the collapse of Silicon Valley Bank and the contagion spreading to other mid-market US banks, have contributed to the overall uncertainty in India’s office leasing demand.
Read also: Private equity investment in real estate sector pegged at $5.1 billion in 2022
“The reduced global capital available for residential credit and the development of office assets, which are mainstream real estate products in India, is another factor that will result in muted investment volumes. However, the demand for investing in core office, core retail, warehousing, data centres and life sciences is extremely strong. Indian real estate offers huge potential for strategic investments and significant returns with new investment formats aligned to current requirements,” said Diwakar Rana, Managing Director, Capital Markets, Savills India.
Also read: Private equity in real estate drops 17% y-o-y to $5.1 b in 2022: Report
During Q1, all investment activity came from foreign funds and was concentrated in the western region of India, particularly Mumbai and Pune. Mumbai saw investments in ready industrial and warehouse assets, whereas Pune experienced investments in office assets, stated the report.
Moreover, the data indicate that commercial office assets remained the top performer in Q1 2023, capturing approximately 64 per cent of the total investment. All the quarterly investments originated from foreign institutional investors and were focused on development office assets in Pune.