In its latest report, leading international property consultancy, Knight Frank India, disclosed that the Indian real estate market garnered private equity (PE) investments totaling USD 3.0 billion from 23 deals throughout 2023 (January 01 – December 12, 2023).
Breaking down the distribution of PE investments in 2023, the office sector took the lead with 58%, followed by warehousing at 23%, and residential properties at 19%. Remarkably, the retail sector did not witness any PE deals during the year. Key metropolitan areas, namely Mumbai (USD 1,685 million), the National Capital Region (USD 835 million), and Bengaluru (USD 347 million), attracted the lion’s share of investments across sectors in 2023.
Global geopolitical uncertainties and a high-interest rate environment, coupled with multiple rate hikes from the US Federal Reserve and the Central Bank of Canada, resulted in a substantial 44% year-on-year reduction in PE investments from the US and Canada, down from USD 5.3 billion recorded in 2022. Conversely, PE investments from Singapore towards Indian real estate experienced a noteworthy increase, rising from 31% in 2022 to 53% in 2023.
The office sector remained the primary recipient of investments in 2023, totaling USD 1.8 billion. Notably, 91% of the investments were directed towards ready assets, reflecting investor caution. Despite a 29% year-on-year decline in PE investments in the office sector, the first half of 2023 witnessed significant transactions, such as the USD 1.4 billion deal involving GIC investing in Brookfield India Real Estate Trust REIT. Mumbai, the National Capital Region, and Bengaluru emerged as the key destinations for office investments.
In the residential sector, USD 577 million in investments were attracted in 2023, with a focus on under-construction projects and early-stage investments. Notably, 82% of these investments came from foreign PE players, with NCR and Bengaluru leading as primary investment hubs.
The warehousing segment witnessed a contraction in investments, totaling USD 684 million in 2023, down from USD 1.9 billion in 2022. Despite this decrease, the outlook remains optimistic, with private equity investors actively exploring subsectors within warehousing, particularly in e-commerce, logistics, and third-party logistics (3PL) facilities.
The retail sector, in contrast, saw no private equity deals in 2023 due to global economic concerns and increased interest costs. However, the listing of a retail Real Estate Investment Trust (REIT) is anticipated to generate interest in the future. Beyond major metros, investor interest in the retail sector has expanded, with notable investments in cities such as Chandigarh, Nagpur, Amritsar, Indore, and Bhubaneshwar. These developments underscore the sector’s growth potential and continued interest from investment platforms.
