PE investments in real estate grew 40% in H1FY23 despite global headwinds

Top 10 deals accounted for 86% of total PE inflows in the first half of this year, as compared to 80% a year ago

Despite global headwinds, Investor confidence in Indian real estate is increasing steadily on the back of an improvement in the Indian economy and the sustained robustness of its real estate sector. Private Equity (PE) investments rose by 40 per cent in the first half (H1) of this financial year over H1FY22, said ANAROCK Capital’s FLUX report.

The top 10 deals accounted for 86 per cent of the total value of PE inflows in the first half of this year, as compared to 80 per cent in the same period last year.

With shifting focus of investors towards multi-city deals and deployment by joint venture (JV) platforms, the average ticket size also rose by 61 per cent during the past one year. According to the report, the average ticket size has risen to $121 million in H1FY23 from $75 million in H1FY22 and 106 million in H2FY22.

Moreover, investment focus was strong in Mumbai Metropolitan Region (MMR) in H1 & H2 of FY22 by PE investors. However, it has shifted to other regions in H1FY23 including the North capital region (NCR) which witnessed a strong increase in capital inflows in PE, said the report.

There is a 60 per cent rise in investments in NCR in H1 of FY23 compared to H2 of FY22, due to JV platform deals like (Brookfield & Bharti Enterprises) and (Bain Capital + TARC).

“Investment focus by PE investors in H1 & H2 FY22 was markedly strong in MMR. In H1 FY23, it has shifted to other regions.”  said Shobhit Agarwal, MD & CEO, ANAROCK Capital

NCR witnessed a strong increase in capital inflows in PE, from $181 million in H1 FY22 and $590 million, in H2 FY22 to $942 million in H1 FY23, he said.

According to the report, equity investments in real estate have risen considerably, and were 43 per cent higher in H1FY23 compared to the same period last year. The same number for debt funding was 20 per cent.

Moreover, equity investment is preferred by PE investors as their share in real estate continues to be healthy at 79 per cent, 300 basis points (bps) higher than H1 FY22.

As per data, the share of investments by foreign investors continued at about 78 per cent in H1FY23. Domestic investments increased by 45 per cent and foreign investments increased by 36 per cent of the total capital inflows in Indian real estate in H1FY23 compared to H1FY22.

Post pandemic, demand and confidence in commercial real estate has seen a meaningful recovery,” said Agarwal.

PE investments in this space was $1,862 million in H1FY23--almost equivalent to the investment in the whole of last year.

The commercial RE space is being preferred by PE investors, as the investment share of commercial assets in the overall real estate pie has increased from 18 per cent and 56 per cent in H1 FY22 and H2 FY22 to 67 per cent in H1 FY23, said the report.

Moreover, demand in the residential sector has also remained healthy in post-pandemic times, resulting in the residential asset class being second-most preferred among all asset classes with $372 million being funnelled into it in 1H FY23. Whereas, with many corporates moving from Work from home to hybrid mode, demand and confidence in the commercial space has resurged and this is expected to continue for the next few quarters.

PE Investment in last 5 years
H1FY19	$3.0 bn
H1FY20	$4.1 bn
H1FY21	$1.5 bn
H1FY22	$2.0 bn
H1FY23	$2.8 bn

Asset class wise funding:
Asset class	H1 2021 (in %)	H1 2022(in %)
Commercial	18	67
Industrial & logistics	45	3
Land	7	6
Residential	15	13
Mixed use	13	8
Others	2	3

TOP 10 PE DEALS in 1H FY23

Capital Provider	Recipient	Deal Size
Investment Board (CPPIB)	Canada Pension Plan Tata Realty & Infrastructure Ltd.(TRIL)	700 mn
Brookfield	Bharti Enterprises	660 mn
Axis AMC	Tishman Speyer	188 mn
Capitaland Investment	Capitaland Development	177 mn
Bain Capital	TARC (Anant Raj)	175 mn
Brookfield	IL&FS	137 mn
Brookfield	Larsen & Toubro (L&T Metro Rail)	129 mn
Credit Suisse	Adani Properties	101 mn
Varde Partners	Omaxe Group	57 mn
HDFC Capital	Signature Global	52 mn