Year Ender 2023: PE investments in real estate decline by 44% to $3 bn


Private equity investments in Indian real estate declined by 44% to $3 billion (bn) in 2023. The distribution of PE investments during the year 2023 saw the office taking the lead with 58%, followed by warehousing at 23%, and residential properties at 19%. The retail sector did not witness any PE deal in 2023, Knight Frank India said in its report Trends in Private Equity Investments in India 2023.

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Global geopolitical uncertainties and high interest rate environment with multiple rate hikes from US Federal Reserve and Central Bank of Canada have curbed investment activities from US and Canada leading to significant reduction of 44% year-on-year (YoY) from $5.3 bn recorded in 2022. However, PE investments from Singapore towards Indian real estate have significantly moved up from 31% in 2022 to 53% in 2023.

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Mumbai ($1,685 mn/1.6 bn), the National Capital Region ($835 mn) and Bengaluru ($347 mn) received the largest proportion of investments across sectors in 2023, said the report .

Also Read: Year Ender 2023: Housing sales likely to touch 2.6 lakh units by end of 2023; Luxury housing sales rise by 83%

“The office segment in India continued to attract investors’ preference owing to the resilience shown by high-quality assets, while the warehousing sector maintained its position as a growing favorite among investors. Foreign investors remained the primary contributors to investments in 2023, followed by domestic investment firms. We have also witnessed that there has been a rise in interest from Asian private equity (PE) players in the recent past,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

The office sector remained the top recipient of investments in 2023

The office sector received $1.8 billion in investments in 2023. Approximately 91% of the investments in 2023 were directed towards ready assets, while 9% were allocated to under construction assets, indicating a tendency among investors to take a cautious stance. PE investments in the office sector declined by 29% YoY in 2023.

While the first half of 2023 witnessed significant transactions, such as the $1.4 billion deal of GIC investing in Brookfield India Real Estate Trust REIT, the latter part of the year experienced a muted pattern in private equity investments. Mumbai, NCR, and Bengaluru emerged as primary destinations for office investments in 2023.

Residential sector attracted $577 million in investments in 2023

Private equity investments in the residential sector were primarily directed towards under-construction projects, with a focus on early-stage investments. As many as 82% of these investments in the residential sector were received from foreign private equity players. NCR and Bengaluru emerged as the primary investment hubs, propelled by transactions in the development stage that featured significant participation from prominent global players.

Investments in the warehousing segment contracted totalling $684 million in 2023

This was a decline from the $1.9 billion recorded in 2022. The scarcity of high-quality ready assets was a contributing factor to the reduction in investments within the warehousing sector. Private equity investors are actively exploring various sub sectors within the warehousing market, with a specific focus on areas such as e-commerce, logistics, and third-party logistics (3PL) facilities. Despite the observed decrease in private equity investment in the warehousing sector in 2023, the outlook remains optimistic for this asset class.

Also Read: New Special Economic Zone rules have the potential to unlock around 15 to 18 mn sq ft of operational SEZ space

Retail sector remained devoid of any PE deals

In 2023, the retail sector remained devoid of any private equity deals due to heightened global economic concerns and increased interest costs, prompting investors to exercise caution, especially with significant investments, the report said.



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