Private equity (PE) investments in the real estate sector dropped by almost 26 per cent YoY to $2.65 billion in 9M (nine months of) FY24, owing to subdued momentum, as both foreign and domestic investors reported lower activity, according to an ANAROCK Capital’s FLUX report. In nine months of FY23, PE investments stood at $3.6 billion.

The domestic alternate investment funds (AIFs) have seen lower activity levels as their preferred asset class and residential real estate debt witnessed lower demand for high-cost funds, noted Shobhit Agarwal, Managing Director and CEO, ANAROCK Capital. Strong residential pre-sales and an accommodating stance by state-owned banks have led to reduced demand for capital from the more expensive alternate investment funds (AIFs), he added. 

Data shows that the share of the top ten deals was 87 per cent of the total value of PE investments in 9M FY24 as compared to 76 per cent in 9M FY23. The top deals includes Brookfield India Real Estate Investments Trust and wealth fund GIC -- $ 1.4 billion.; CPP Investments --$325 million and more.

Additionally, the average ticket size saw a marginal growth to $95 million in 9M FY24 from $91 million in 9M FY23. This is largely due to a large deal, in which Brookfield India Real Estate Trust REIT and Singapore’s sovereign wealth fund GIC together acquired two commercial assets from Brookfield Asset Management with an enterprise value of $1.4 billion.

In fact, the deal also aided to the growth of the commercial real estate sector share in PE deals in 9M FY24, attracting 70 per cent of the total investments. The commercial office space reported a robust performance particularly in the top six cities. The sector’s reliance on IT/ITeS has diminished, with manufacturing, BFSI, and coworking contributing to the resilient demand.

With respect to geographic trends, multi-city transactions increased sharply during the period, dominated by the Brookfield India REIT and GIC. MMR led the transaction league tables in city-specific transactions, with the region reporting investments of $694 million in 9M FY24, against $375 million in 9M FY23.

“Investments by foreign investors have increased to 86 per cent in 9M FY24 as compared to 79 per cent in 9M FY23,” said Agarwal. “Correspondingly, domestic investments decreased to 14 per cent of the total capital inflows into Indian real estate in 9M FY24, at $360 million, compared to $717 million in 9M FY23.

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