Office spaces drive private equity inflow in Indian realty market, Mumbai takes the lead: Knight Frank

Source: Livemint

The distribution of private equity investments during the year 2023 witnessed the office taking the lead with 58 per cent, followed by warehousing at 23 per cent, and residential properties at 19 per cent, according to a report by Knight Frank India.

However, PE investments in Indian real estate declined by 44 per cent to USD 3.0 billion in 2023, the report added. Mumbai, NCR, and Bengaluru emerged as critical destinations for office investments.

Mumbai led the PE investment trend at USD 1,685 million, followed by the National Capital Region (Delhi NCR) at USD 835 million. Bengaluru received USD 347 million in 2023.

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, "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 favourite among investors. Foreign investors remained the primary contributors to investments in 2023, followed by domestic investment firms.

"We have also witnessed a rise in interest from Asian private equity (PE) players in the recent past. This increased attention from Asians, particularly amid the impact on investments from Western countries, could signal a positive shift for the Indian PE market. As global challenges gradually subside, the Indian economy's resilience and the favourable economics of real estate assets are anticipated to spark a resurgence in PE investment activities within the sector," Baijal added.

Investors exhibited caution, with 91 per cent directed at ready assets and 9 per cent at under-construction assets. Private equity investments in the sector saw a significant 29 per cent YoY decline. While H1 witnessed major transactions, such as GIC's USD 1.4 billion investment in Brookfield India Real Estate Trust REIT, the latter part of the year experienced a subdued private equity pattern.

What is the trend for residential space?

The residential sector garnered substantial attention in 2023, drawing in investments totalling USD 577 million. Notably, private equity investments in this sector were strategically channelled towards under-construction projects, emphasising a focus on early-stage commitments. A noteworthy trend emerged as 82% of these residential investments originated from foreign private equity players.