Private equity (PE) investments in real estate registered a sharp decline of 32% in the financial year ended March 31, 2022, to $4.3 billion against $6.3 billion in the last financial year. The flows were impacted by the debilitating effect of second wave of Covid-19, which led to multiple lockdowns in various parts of the country causing serious economic disruptions in almost all industries.
Anarock Capital’s findings suggest that the recently ended financial year also saw a huge drop of 42% in the average deal ticket size, though it is still higher than FY18 levels. The drop in ticket sizes is largely due to investors’ focus shifting back to individual assets as opposed to their preference for portfolio deals in FY21. The absence of portfolio deals resulted in average ticket size reducing to $93 million — back to FY19 levels, though still higher than FY18 levels. Multiple deals slipped into the next financial year due to transactional delays. Domestic PE investors showcased higher confidence — their contribution increased from 5% in FY21 to 14% in FY22, also remaining higher than FY18 levels.
Unlike in FY21, investors in FY22 preferred single-city deals over multi-city, resulting in the share of multi-city deals reducing by nearly 70% in the year ended March.
Shobhit Agarwal, managing director & CEO, Anarock Capital, said: “Equity continues to remain around 80% of the total PE investments in Indian real estate. The commercial sector attracted the highest investment in FY22 at 38%, followed by the industrial & logistics sector at 22%, while residential clocked in at a mere 14%. Meanwhile, investments by domestic funds doubled in size in FY22 – from $290 million in FY21 to $600 million in FY22. The increasing confidence of domestic funds reflects the return of overall positivity after a harrowing year of pandemic disruption and uncertainty.”
The listed REIT market regained sizable market cap in the last 12 months with PE investor interest in Grade A office assets with quality tenants remaining high. Data centres as an asset class are an exciting emerging sector, while last-mile funding led by SWAMIH Fund remained healthy.