Private equity (PE) investment in real estate declined 5 per cent year-on-year in April-June to USD 1.9 billion because of high interest rates, according to Anarock.
PE inflows stood at USD 2 billion in the year-ago period. Real estate consultant Anarock has come out with a report titled ‘FLUX Q1 FY24 Market Monitor for Capital Flows in Indian Real Estate’. “PE activity marginally declined by 5 per cent in Q1 FY24 given the elevated interest rates,” the report said. PE inflows stood at USD 1.4 billion in the first quarter of 2021-22, USD 0.2 billion in Q1 FY21 and USD 1.7 billion in Q1 FY20.
As per the data, foreign investors accounted for 94 per cent of the PE investments, while the share of domestic fund was 6 per cent. PE funding remained dominated in form of equity, which contributed 94 per cent to the total inflow. Anarock noted that the “overall activity remained muted with headline numbers boosted by a large single deal with assets across locations.” In May, Brookfield India REIT (BIRET) and Singapore’s GIC announced an equal partnership to acquire two commercial properties in India for USD 1.4 billion.
Out of the total inflow, 90 per cent came in office assets during April-June. In the year-ago period, 68 per cent of the PE inflow came from office assets. Shobhit Agarwal, MD & CEO of Anarock Capital, said, “Excluding this deal, private equity activity remained subdued owing to a high interest rate environment and global uncertainties.” “PE transactions in Indian real estate are, in any case, tilted towards equity investments in office assets by foreign investors. The single large deal between the consortium of GIC and Brookfield REIT with Brookfield AMC has further skewed the mix during the quarter,” Agarwal said.
Residential segment attracted 6 per cent inflow in Q1, FY24 as against 19 per cent in the year-ago period. Gagan Randev, Executive Director, India Sotheby’s International Realty, said the slight decline in PE investment during April-June can be attributed to the temporary slowdown and disruptions in the global economy. “However, this is expected to be a transient phase, and we anticipate an increase in PE investment in the upcoming quarter. India’s robust economic growth and the rising demand for Grade A office spaces, sharp rebound in retail and strong warehousing demand post-Covid indicate a positive outlook,” Randev said.
As per the Anarock data, PE investment in real estate remained stable at USD 4.2 billion during 2022-23. PE inflows stood at USD 4.2 billion in 2021-22, USD 7.2 billion in 2020-21, USD 6.3 billion in 2019-20, and USD 5.3 billion in 2018-19.
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