PE investments in real estate down 5% YoY at 1.9 bn in Q1 FY24: Report

Increase interest rates impact investment flows, deal activity muted

Private equity (PE) investments in Indian real estate declined five per cent year on year (YoY) to $ 1.9 billion in April-June 2023 (Q1 FY24) as interest rates increased.

Investments worth $2 billion were made in Q1 FY23, according to real estate advisory firm Anarock. Investments have crossed the pre-pandemic level when PE flows were about $ 1.7 billion in April-June 2019 (Q1 FY20), according to 'FLUX', the company’s market monitor for capital flows.

The share of foreign PE money had a dominant share (94 per cent) in Q1 FY24, up from 90 per cent in April-June 2022 (Q1 FY23).

Overall activity remained muted with headline numbers boosted by a large single funding.

The share of portfolio deals, or investment covering assets in multiple cities, was 74 per cent in Q1 FY24 compared to 38 per cent in Q1Fy23.

Average ticket size went up sharply to $192 million in Q1 FY24, driven by a single large transaction in which a GIC of Singapore (a sovereign wealth fund) partnered with a REIT to buy commercial assets. The average ticket size was $100 million in Q1 FY23.

Anarock said driven by the transaction between Brookfield India RE Trust REIT and GIC, investments in commercial real estate accounted for most of deal activity in Q1 FY24. The share of commercial realty was 90 per cent in Q1 FY24, up from 68 per cent a year ago.

The residential real estate’s share in getting PE investments was six per cent compared to 19 per cent in Q1 FY23. The industrial and logistics sector’s share was four per cent in Q1 FY24 compared to three per cent in Q1 FY23.