However, average ticket size of deals declined 32%
Investments by private equity (PE) funds in the Indian real estate market grew 27% Y-o-Y to $1.79 billion, or roughly Rs 13,500 crore, during April-September of this fiscal (FY22) as investors displayed confidence in the sector’s growth potential backed by strong fundamentals, especially in the office leasing and warehousing segments.
According to Anarock Property Consultants, commercial real estate (CRE) attracted the highest investments at 33%, followed by industrial & logistics (30%) and residential (22%) segments. The top 10 deals in H1 FY22 contributed nearly 81% of the total PE investments in the country.
Of the total PE inflows, CRE again attracted the bulk of investments at around $591 million. The logistics sector saw significant investments of about $537 million in H1 FY22, while the residential sector witnessed investments to the tune of $394 million. Data centres, land and mixed-use developments attracted the remaining 15% of the overall inflows comprising 5% each.
However, the average ticket size for PE deals declined 32%Y-o-Y, from $114 million in H1 FY21 to $78 million in H1 FY22. While the overall PE inflows in Indian Rupee increased, the share of foreign funds fell by 19% in H1 FY22 compared to H1 FY21.
“Data further revealed that while overall PE inflows in Indian real estate increased in H1 FY2022, the share of foreign funds reduced by 19% as compared to H1 FY21. Investments by domestic funds jumped from less than $10 million in H1 FY21 to $650 million in H1 FY22, a reflection of the improving situation in the country resulting in higher confidence by domestic funds,” Anarock said.
Foreign investors continued to remain major contributors with around 63% share of the total inflows in H1 FY22. However, in the same period of FY2021, they contributed a 99% share. This indicates the growing confidence of domestic funds amid the growing economy despite the second Covid wave, it added.
Anarock Capital CEO Shobhit Agarwal said the average ticket size for the PE deals in the current period declined by 32% to $78 Mn in H1 FY22 from $114 Mn in H1 FY21. “Notably, investors this time preferred single city deals in contrast to multi-city deals. As seen, the share of multi-city deals reduced from 77% to 42% in H1 FY 2022,” he added.
Talking about the trends, Agarwal pointed out that Investors have maintained their confidence in listed REITs. Post the dip in market capitalisation earlier this year, REITs have bounced back well. Besides, the demand for flexi offices is gaining momentum and they are expected to attract more PE investments over the next 1-2 years.
“Operators are aggressively looking at expansion of data centres across major locations in the country. Residential is witnessing accelerated consumer demand amid growing preference for homeownership coupled with historically low home loan rates. Investors will seek various investment themes within this asset-class,” he added.