PE in Indian realty continues to soften amid global headwinds: Anarock

Private equity (PE) investments in the Indian real estate sector continued to soften in the financial year 2024-25 (FY25) amid shifting investor preferences against the backdrop of global economic headwinds, according to a report by Anarock.

 

From a peak of $6.4 billion in FY21, investment volumes declined to $3.7 billion in FY25 – a fall of 43 per cent over five years. In FY24, the investments stood at $3.8 billion.

 

The number of deals also dropped sharply to 39 in FY25 from 51 in FY24. As a result, the average deal size increased to $94 million from $75 million.

 

Shobhit Agarwal, managing director and chief executive officer, Anarock Capital, said, “PE investment volumes have steadily declined over the past five years, dropping from $6.4 billion in FY21 to approximately $3.7 billion in FY25. This represents a 43 per cent decrease from FY21 levels, primarily driven by reduced foreign investor activity amid heightened global macroeconomic uncertainty and geopolitical volatility.”

 

FY25 saw a significant deviation in funding structure, with hybrid deals surging to 42 per cent of total PE capital, primarily due to the Reliance-ADIA-KKR transaction. Equity and debt investments dropped to 37 per cent and 21 per cent, respectively.

 

The top real estate PE transaction in FY25 featured the Shapoorji Pallonji and GIC-Xander deal worth Rs 2,150 crore ($258 million), while the top debt deal was between Elan Group and Kotak Realty, where the latter provided a capital of Rs 1,200 crore ($143 million) to the Gurugram-based developer.

 

Further, foreign capital made a strong comeback, with cumulative investments in FY25 at $3.1 billion, compared to $2.6 billion in FY24. The surge in foreign investments led to an increased share of foreign investors in Indian real estate, accounting for 84 per cent of total investment in FY25, up from 68 per cent in FY24.

 

The report stated that after a stellar run, the residential sector has entered a consolidation phase, as the average deal value for Q2-Q4FY25 was $117 million as compared to $233 million in the preceding 12 quarters.

 

However, international equity interest is emerging, with Blackstone’s investment in Kolte Patil (Rs 1,167 crore) and Alpha Wave’s deal with Oberoi Realty (Rs 1,250 crore).

 

Meanwhile, the office segment saw a steep decline in investments, from $2.2 billion in FY24 to $806 million in FY25. While leasing activity remains robust, investor caution persists due to high interest rates and geopolitical stress. The outlook is optimistic, with potential rate cuts on the horizon, the report added.