Year Ender 2023: Private equity investments in Indian real estate have dropped by 44%

By Bricksnwall | 2023-12-21

In 2023, office takes 58%, warehousing 23%, and residential 19% of PE investments; Mumbai and NCR receive the greatest share; Singapore investments increase.

In 2023, private equity investments in Indian real estate will have decreased by 44% to $3 billion (bn). The office took the lead with 58% of PE investments in 2023, followed by warehouses at 23% and residential buildings at 19%. According to Knight Frank India's report Trends in Private Equity Investments in India 2023, the retail sector would see no PE deals in 2023.

Global geopolitical uncertainties and a high interest rate environment, with several rate hikes from the US Federal Reserve and the Central Bank of Canada, have curtailed investment activities from the US and Canada, resulting in a 44% year-on-year (YoY) decrease from $5.3 billion in 2022. However, Singaporean private equity investments in Indian real estate have increased dramatically, from 31% in 2022 to 53% in 2023.

According to the analysis, Mumbai ($1,685 million/1.6 billion), the National Capital Region ($835 million), and Bengaluru ($347 million) will receive the highest proportion of investment across sectors in 2023.

foreign investors continued to be the largest donors to investment, followed by domestic investment businesses. "We have also seen a recent increase in interest from Asian private equity (PE) players," said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

In 2023, the office sector will continue to be the biggest recipient of investment.

In 2023, the office sector will receive $1.8 billion in investment. In 2023, over 91% of investments were directed towards ready assets, while 9% were devoted to under construction projects, showing a cautious approach among investors. In 2023, private equity investments in the office sector fell by 29% year on year.

While the first half of 2023 saw substantial deals, such as GIC's $1.4 billion investment in Brookfield India Real Estate Trust REIT, the second half of the year saw a more muted pattern in private equity investments. Mumbai, NCR, and Bengaluru emerged as the top office investment destinations in 2023.

In 2023, the residential sector attracted $577 million in investment.

Private equity investments in the residential sector focused mostly on under-construction projects, with an emphasis on early-stage investments. Foreign private equity investors accounted for up to 82% of these residential investments. NCR and Bengaluru emerged as the key investment hubs, pushed by development-stage transactions including considerable participation from prominent global organisations.

Contracts for storage vestments totaling $684 million in 2023

This represented a decrease from the $1.9 billion recorded in 2022. The paucity of high-quality ready assets contributed to the decrease in investments in the warehousing sector. Private equity firms are aggressively investigating numerous subsectors of the warehousing business, with a particular emphasis on e-commerce, logistics, and third-party logistics (3PL) facilities. Despite a reduction in private equity investment in the warehousing sector in 2023, the forecast for this asset class remains positive.