Private equity investments in real estate sector down by 20% YoY in H23

Investors turn cautious on geo-political worries, recession fears

The private equity (PE) investment in India’s real estate sector declined by 20 per cent Year on Year to $ 2.6 billion in January-June 2023 (H1) as PE investors turned conservative amid global concerns, according to Knight Frank India.

Nearly 75 percent of investments came from Asian countries in H1 2023, in contrast to 86 per cent investment received from Canada & US in H1 2022. The impact of increased capital cost, and growing concerns of recession has subdued investment activity from countries like the US and Canada.

Knight Frank, the international property consultancy in its latest report on PE investments said the tightened lending standards and geopolitical uncertainty on a global scale kept investors cautious and limited their involvement in the market.

In the first half of 2023, over 80 per cent of the total investments were directed towards ready assets, clearly indicating investors’ cautious stance. The balance 20 per cent were allocated to new and under-construction developments, reflecting investor aversion to risks, it added.

The office sector at 68 per cent accounted for the largest share of all PE investments, followed by warehousing at 21 per cent. The investment in the warehousing segment experienced a contraction in H1 2023, with an amount of $555 million compared to $1.2 billion in H1 2022. The residential segment had 11 per cent share.

The retail segment did not have any PE investment in H12023. However, the listing of a retail REIT will likely lead to increased interest among investors.

 Mumbai received the highest investments accounting for 48 per cent, NCR stood second at 32 per cent and Bengaluru at 13 per cent in H12023.

Despite prevailing global concerns influencing investments, the moderation in growth has been limited, and a rebound is anticipated in the second half of 2023. Overall, PE investments in the Indian real estate sector are estimated to touch $5.6 billion in calendar 2023, showing a 5.3 per cent YoY growth, Knight Frank added.