Private equity (PE) investment in real estate increased 40 per cent during the April-September period of this fiscal to USD 2.8 billion, with a huge inflow coming from foreign funds especially in office assets, says a report. According to the Anarock report, PE investment stood at USD 2 billion in the corresponding period of the last financial year.
“Investor confidence in Indian real estate is increasing steadily as a reflection of improvement in the Indian economy and state of real estate industry,” said Shobhit Agarwal, MD & CEO of Anarock Capital, which is part of real estate consultant Anarock.
As per the report, investments by foreign investors contributed around 78 per cent to the total inflow in the first half of this fiscal, reflecting their strong confidence in Indian real estate. Domestic investments increased by 45 per cent while foreign investments rose by 36 per cent of the total capital inflows in April-September of 2022-23, compared to the year-ago period.
Top 10 deals accounted for 86 per cent of the total value of PE investments in the first six months of this fiscal, as compared to 80 per cent in the first half of FY’22. Among various asset classes of the real estate sector, Agarwal said the demand in the office market has seen a “meaningful recovery”.
The PE investments in office assets stood at USD 1,862 million during April-September of this fiscal — almost equivalent to the investment in the whole last financial year.
Office market was adversely hit during the 2020 and 2021 calendar years, because of the COVID-19 pandemic and lockdowns. Adoption of work from home reduced office space demand.
The consultant said that housing demand has also remained healthy in post-pandemic times, resulting in the residential asset class being second-most preferred among all asset classes with USD 372 million being funnelled into it in H1 of FY23. Across geographies, Anarock noted that PE investments came more in Delhi-NCR.
“NCR witnessed a strong increase in capital inflows in PE — from USD 181 million in H1 (April-September) of FY’22 and USD 590 million in H2 (October-March) FY’22, to USD 942 million in H1 of FY’23,” Anarock said, adding that the inflows were driven by joint venture platform deals like Brookfield with Bharti Enterprises and Bain Capital with Tarc.
Commenting on the trend, realtors’ body NAREDCO President Rajan Bandelkar said the Indian real estate sector has so far very well navigated itself amid the pandemic and the current global economic concerns.
“The rise in private equity investments is both evidence and strong indication for the sector’s growth prospects and investor community’s confidence in it,” he added.
Lifting of the COVID restrictions, improvement in market sentiments and resumption of economic activities have been major factors for the rise in investments, Bandelkar listed out.
Pradeep Aggarwal, Founder and Chairman of realty firm Signature Global, said the real estate sector as a whole, be it residential or commercial, has performed significantly well since last one year.
“Domestic as well as global investors are chasing for opportunities to deploy funds in the Indian real estate market. We expect the trend to continue,” said Aggarwal, whose company is into development of affordable homes.
Anarock Capital’s report highlighted that out of USD 2.8 billion inflow in April-September 2022 by PE firms, nearly USD 2.2 billion was in the form of pure equity and the rest structured debt. The consultant noted that investments in office, residential and industrial & logistics assets will continue.