PE investments in real estate dip 26% to $2.65 billion in April-December on global uncertainties, high interest rate: Report

PE Investments registered a decline of around 26 percent in first nine months of the financial year 2023-24 to $2.65 billion as both foreign and domestic investors reported lower activity, according to ANAROCK Capital’s FLUX report for 9M FY24.

According to the report, the total PE (personal equity) investment stood at $2.65 billion in April-December period of FY24 as against $3.6 billion in the same period in FY23. Activity from foreign investors remained subdued for most of this period due to global geopolitical uncertainties and a high interest rate environment, the report noted.

The report said that the share of top 10 deals was 87 percent of the total value of PE investments in first nine months of FY24 and average ticket size marginally increased to $95 million in 9M FY24 from $91 million in 9M FY23.

The marginal increase in average ticket size was largely due to a large deal in which Brookfield India Real Estate Trust REIT and Singapore’s Sovereign Wealth Fund GIC together acquired two commercial assets – one in Mumbai and the other in Gurugram in NCR, from Brookfield Asset Management with an enterprise value of $1.4 billion, the report highlighted.

Mumbai Metropolitan Region (MMR) led with investments of $694 million in first nine months of FY24, against $375 million in the corresponding period in FY23. Investments by foreign investors rose to 86 percent in 9M FY24 against 79 percent in 9M FY23. Correspondingly, domestic investments decreased to 14 percent of the total capital inflows into Indian real estate in 9M FY24 at $360 million, compared to $717 million in 9M FY23.

Also Read: Real estate sector saw investments worth $43.3 billion in four years

Shobhit Agarwal, MD and CEO – ANAROCK Capital, says, “Domestic alternate investment funds (AIFs) have seen lower activity levels as their favoured asset class – residential real estate debt – witnessed lower demand for high-cost funds. Strong residential pre-sales and an accommodative stance by state-owned banks have led to reduced demand for capital from the more expensive AIFs.”

The report also stated that April-December period of FY24 saw a robust performance in the commercial office space, particularly in the top six cities. The sector’s reliance on IT/ITeS has diminished, with manufacturing, BFSI, and co-working contributing to the resilient demand. Growth in the IT/ITES sector is expected as more employees shift to working from offices for 3-4 days a week.

On a quarterly basis, the rental landscape displayed positive momentum, with most micro-markets experiencing increases of 0-5%. Of these, Bengaluru, Mumbai, and Chennai, demonstrated stronger rental growth.