Indian real estate PE investments continue to slide amid soaring interest rates

Private equity investments in India’s real estate sector dipped 5% in the April-June quarter, reflecting a widespread industry slump resulting from the ongoing high-interest rate environment and global uncertainties.

According to real estate consultant ANAROCK, the sector recorded private equity investments worth $1.9 billion in Q1 2023, a tad lower than $2 billion in the year-ago quarter.

The reported numbers were propped up by Singapore’s sovereign wealth fund GIC and Brookfield India REIT’s consortium to acquire commercial properties in India, which accounted for about thre-fourths of the overall deal activity.

GIC and Brookfield India’s deal marked the first partnership between a listed real estate investment trust (REIT) and global institutional investor in the country.

“PE transactions in Indian real estate are, in any case, tilted towards equity investments in office assets by foreign investors. The single large deal between the consortium of GIC and Brookfield REIT with Brookfield AMC has further skewed the mix during the quarter,” Shobhit Agarwal, MD & CEO – ANAROCK Capital.

Out of the total inflow, 90% came in commercial assets during April-June. In the year-ago period, 68% of the PE inflow came from commercial assets.

With demand for desk space driven by “the resilience of investable grade office assets”, India’s office sector snapped up the largest private equity funding, brokerage firm Knight Frank said in its report last week.

Knight Frank reported that private equity investments in India’s real estate tumbled 20% in the first half of 2023 to $2.58 billion from the same period last year. Funding in real estate by private equity firms is expected to reach $5.6 billion at the end of 2023, a 5.3% growth from last year, said Knight Frank, which expects the market to bounce back, the report said.

The deal also pushed up the average ticket size sharply in the quarter. The average ticket size went up from $100 million in Q1 2023 to $194 million in Q1 2024.

Similar to last year, funding was dominated by equity funding transactions by foreign investors, the report said.

In terms of geography, the National Capital Region (NCR) notched up the biggest private equity investments of $1.6 billion with six deals.

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