Indian Real Estate: PE Investment Decline & Commercial Sector Resilience – 9M FY24 Reports

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    Private equity (PE) investments observed a downturn of about 26% in the initial nine months of the fiscal year 2023-24, amounting to $2.65 billion, as both local and overseas investors participated less, states ANAROCK Capital’s FLUX report for 9M FY24.

    During April-December in FY24, the total PE investment stood at $2.65 billion, contrasting with $3.6 billion during the same period in FY23. Global uncertainties and a high-interest rate scenario led to subdued activity among foreign investors, the report indicated.

    The report emphasized that the top 10 deals constituted 87% of the total value of PE investments in the first nine months of FY24, with the average ticket size slightly rising to $95 million in 9M FY24 from $91 million in 9M FY23.

    This incremental rise in average ticket size primarily resulted from a substantial deal involving Brookfield India Real Estate Trust REIT and Singapore’s Sovereign Wealth Fund GIC. Together, they acquired two commercial assets in Mumbai and Gurugram in the NCR from Brookfield Asset Management for an enterprise value of $1.4 billion.

    In the initial nine months of FY24, the Mumbai Metropolitan Region (MMR) dominated with investments totaling $694 million, a notable increase from $375 million during the corresponding period in FY23. Foreign investors accounted for 86% of investments in 9M FY24, up from 79% in 9M FY23.

    In contrast, domestic investments dwindled to 14% of the total capital inflows into Indian real estate in 9M FY24 at $360 million, compared to $717 million in 9M FY23.

    Shobhit Agarwal, MD and CEO of ANAROCK Capital, noted, “Domestic alternate investment funds (AIFs) witnessed decreased activity levels as the demand for high-cost funds in their preferred asset class, residential real estate debt, reduced.

    Strong residential pre-sales and favorable stances by state-owned banks contributed to diminished demand for capital from relatively expensive AIFs.”

    The report highlighted a robust performance in the commercial office space during the April-December period of FY24, especially in the top six cities. The sector’s reliance on IT/ITeS lessened, with contributions from manufacturing, BFSI, and co-working spaces bolstering resilient demand. Anticipated growth in the IT/ITES sector is foreseen as more employees transition to working from offices for 3-4 days weekly.

    Quarterly, the rental landscape showcased positive momentum, witnessing increases of 0-5% in most micro-markets. Bengaluru, Mumbai, and Chennai displayed stronger rental growth among these cities.

    (Source: Moneycontrol)

    Also read: Real Estate Trends and Economic Overview: Delhi-NCR and Gurugram – 2023 Recap and 2024 Outlook

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