Private Equity Investments in Indian Real Estate Witness a 26% Dip Amidst Global Uncertainties

In the period of April to December of the current fiscal year, private equity (PE) investments in the Indian real estate sector witnessed a significant decline of 26%, totaling USD 2.65 billion, according to a report by Anarock. This decrease is attributed to the cautious approach adopted by both foreign and domestic investors in the wake of global uncertainties and elevated interest rates.

Compared to the corresponding period in the previous year, the PE inflow amounted to USD 3.6 billion, indicating a substantial drop in investor activity. Anarock Capital’s report FLUX revealed that out of the total PE inflow, 84% constituted equity, while the remaining portion was in the form of debt.

An interesting trend highlighted in the report is the shift in the composition of investors. Shobhit Agarwal, MD & CEO of Anarock Capital, pointed out that the share of foreign investors in the total PE inflow has increased from 79% in the previous year to 86% in the current period. On the contrary, domestic investors’ contribution dwindled to 14% of the overall capital inflows into the Indian real estate market during the April-December period of the fiscal year 2024.

Domestic investors, specifically, saw a substantial decrease in their contributions, with inflows dropping to USD 360 million in the first nine months of this fiscal year compared to USD 717 million in the same period of the previous year. Anarock attributed the decline in PE investments to reduced activity from both foreign and domestic investors.

Foreign investor activity remained subdued throughout this period due to global geopolitical uncertainties and a prevailing high-interest-rate environment. Agarwal also highlighted the lower activity levels among domestic Alternative Investment Funds (AIFs), attributing it to decreased demand for high-cost funds in the ‘residential real estate debt’ asset class.

Explaining the dip in average ticket size, Agarwal stated that it marginally increased to USD 95 million in April-December of fiscal year 2024 from USD 91 million in the previous year. This shift is primarily influenced by a significant deal where Brookfield India Real Estate Trust REIT and Singapore’s sovereign wealth fund GIC jointly acquired two commercial assets—one in Mumbai and the other in Gurugram, Delhi-NCR—from Brookfield Asset Management, with a combined enterprise value of USD 1.4 billion.

In conclusion, the decline in private equity investments in the Indian real estate sector is attributed to a combination of global uncertainties, high-interest rates, and changing preferences among investors. The report underscores the shifting dynamics in investor composition, with foreign investors gaining prominence while domestic investors adopt a more cautious stance.

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