Real estate PE investments drop 12% to $2.7 bn in H1 FY24

Private equity investments registered a decline of 12% in H1 FY24 due to lower investments in the residential space, according to the latest report by real estate services company Anarock. During the same period last year (H1 FY23), the PE investments in India’s real estate market stood at $2.7 billion and were $2 billion in H1 FY22. 

The average ticket size in the first half of the fiscal year, however, increased to $117 million from $100 million in the year-ago period. This has been attributed to a large deal in which Brookfield India Real Estate Trust REIT and Singapore’s sovereign wealth fund GIC together acquired 2 commercial assets -- one in Mumbai and other at Gurugram (NCR), from Brookfield Asset Management with an enterprise value of $1.4 billion.

Among the top 10 deals in H1 FY24, office assets dominated large ticket equity investments, with data centres emerging as a "new asset class", with a value of $73 million. The residential real estate also continued as an "attractive destination" for debt investments, says the report, adding the top 10 deals accounted for 95% of the total value of PE investments in the said period vs 81% in H1 FY23.

In terms of the movement of capital flow, multi-city transactions increased sharply in the said period, dominated by Brookfield India REIT & GIC. Mumbai Metropolitan Region (MMR) led the transaction league tables in city-specific transactions, with $543 million worth of investment in the said period vs $307 million in in the year-ago period.

Between equity and debt funding, equity investments were the preferred choice for PE investors, and its share rose to 89%, up from 78% in the year-ago period.

Between domestic vs foreign funding, domestic investments increased by 9% of the total PE capital inflows in Indian real estate at $274 million in H1 FY24, compared to $252 million in H1 FY23, indicating higher confidence by domestic funds. The share of foreign investments in the first half of the fiscal year also dropped to 88% vs 91% in the year-ago period.

Among the asset classes, the commercial sector in India witnessed an increase in capital inflows via private equity investments, accounting for a 78% share of investments received in 1H FY24 compared to 56% in 1H FY23. 

"This can be attributed towards continued preference by investors in Grade-A office assets with quality tenants," the report says, adding that residential accounted attracted 8% investment in the first half of the fiscal year, down from 20% in the same period last year.

In its outlook, Anarock says the underlying demand in the residential segment remains strong on the back of a robust economy. "We expect the current demand trends to sustain in the foreseeable future, with volumes expected to hit a new decadal high in CY23." In "commercial office" and "retail", Anarock foresees a "stable" and "buoyant" outlook this year, backed by demand from return to office and rising consumer spending.