 "Office space, workplace, workpace, co-working space")
The commercial offices segment dominated private equity ( PE) transactions in fiscal year 2024 with a 57 per cent value share, according to a report by property consulting firm Anarcok.
The report, titled "FLUX: The Dynamics of PE in Indian Real Estate 2024," reveals a steady decline in the aggregate value of PE deals over the past five financial years (FY2020-FY2024) - from $5.1 billion in FY20 to $3.7 billion in FY24.
"The decline in PE investments in Indian real estate has been due to lower activity by foreign investors, due to global macro-economic factors and geopolitical instability,” said Shobhit Agarwal, MD & CEO – ANAROCK Capital.
The share of foreign capital in total investments declined to 65% in FY24, against 78% in FY20. Correspondingly, investments by domestic investors have increased to 29% of the total capital inflows into Indian real estate in FY24, as compared to merely 8% in FY20.
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While the number of deals in FY24 is largely constant, the aggregate deal value has reduced due to a sharply lower average deal size. The average ticket sizes have reduced by 30% - to $75 million in FY24 from $107 million in FY20.
Multi-city transactions clearly stole the limelight during FY24, with the GIC-Brookfield transaction and the fund raise by Prestige Estates. NCR witnessed a relatively muted year, while MMR continued to dominate city-specific deal tables.
Equity vs Debt Funding
PE investors prefer equity investments, as evidenced by the fact that the share of equity deals remains healthy and at par with the average of 75% in the past 5 years.
Top 10 PE Deals in FY24
Top 5 Equity Deals
Top 5 Debt Deals
The share of the top 10 deals has increased primarily due to the USD 1.4 Bn GIC-Brookfield deal (approx.40% of the overall deal value for FY24), reported at the beginning of FY24.
Sectoral Trends:
Office Dominates, Residential Remains Steady: The commercial office segment led PE transactions in FY24, accounting for 57% of the total value. This was heavily influenced by the large GIC-Brookfield deal. Residential real estate maintained a consistent share of around 28% year-on-year, although the value declined by 17% compared to FY23, which saw a surge in investments.
Share of top 10 deals - FY23: 54%, FY24: 72.5%
“While there has been a consistent share of PE investments in residential real estate at 28% YoY, there is a yearly decline of 17% in the same by value,” said Shobhit Agarwal. “This is due to a very high base in FY23, when investments had doubled over the previous years.”
Domestic vs Foreign Funding
In the overall investments during FY24, foreign capital saw its share drop to 65% in FY24 while the share of domestic investor rose to 29% (against 8% in FY20).
Emerging Opportunities: Industrial & Logistics and Data Center segments witnessed a slight increase in investment share, suggesting potential growth areas for future PE activity.
Despite the decline in overall volume, the report highlights positive signals for specific segments. The retail sector thrives on economic growth, with major developers expanding their footprints. Industrial & Logistics holds promise due to rising consumption and manufacturing focus. Additionally, the recent regulatory changes for Small and Medium Real Estate Investment Trusts (SM REITs) might unlock fresh capital inflow.
