Private equity (PE) investments in India’s real estate sector recorded a drop of 17 per cent year-on-year (y-o-y) to $5.1 billion in 2022, compared to $6.2 billion in 2021, due to factors such as rise inflation, high-interest rates, and geopolitical unrest, according to a report.
The latest report by Knight Frank India states that the sector saw 29 deals across the office, warehousing, residential and retail sectors in 2022. From 2011 to 2022, the total private equity investment in the Indian real estate sector stood at $54.8 billion through 659 deals.
Apart from the slump in investments observed in 2020 due to Covid, PE investments in Indian real estate have remained strong in the last decade, with average investments of $4.6 billion per year from 2011 to 2022, said the report.
Favoured asset class
The office sector continued to remain the favoured asset class constituting 45 per cent of the total PE investments during 2022, the warehousing segment at 37 per cent, residential at 12 per cent, and retail at 6 per cent.
The report stated that going forward in 2023, as global headwinds are likely to abate by mid-2023, the capital investment environment is expected to improve.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “The investment climate in India, moderated in 2022 as investors grew more cautious in response to escalating international tensions and concerns about rising inflation and interest rates.”
Despite the intensifying global economic recessionary concerns and inflationary pressures, PE investments in Indian real estate assets provided a favourable investment avenue for both global and domestic institutional investors, Baijal said.
The Chairman added, “The office segment remained the most popular investment category whereas the warehousing segment continued to observe a rise in interest amongst PE investors supported by the strong demand from manufacturing, e-commerce, and third-party logistics occupiers.”
City wise contribution
Data from the report found that among major cities — Mumbai, Bengaluru, and NCR jointly contributed 86 per cent to total exits observed from 2011 to 2022, while the individual contribution of these cities stood at 46 per cent, 27 per cent, and 13 per cent, respectively.
Mumbai recorded Bengaluru exits to the tune of $4.44 billion followed by Bengaluru with $2.63 billion from 2011-2022.