India’s Real Estate Sector Attracts Strong PE Investments Amid Global Uncertainty

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    Despite the prevailing global economic uncertainties, investor confidence in the Indian real estate sector remains robust. Private equity investments surged to USD 934 million (INR 78 billion) in Q3 2023, marking a nearly threefold increase from the previous year. In the first nine months of 2023, the sector saw a total of USD 2.1 billion (INR 173 billion) in investment inflows, reflecting a modest 2% growth compared to the same period in the previous year. Both foreign and domestic institutional investors continue to find appealing opportunities in the Indian real estate market.

    During Q3 2023, the commercial office segment emerged as the preferred choice for investments, capturing an impressive 81% of the total investment share. Foreign institutional investors took the lead in investment activity, primarily targeting development assets in Mumbai, and core assets in Delhi-NCR and Chennai. Furthermore, investments in industrial and warehousing properties in Mumbai, Cuttack, Aurangabad, Hosur, and Goa, as well as residential assets in Pune and the NCR, contributed significantly to the sector’s growth.

    Real Estate Investment Trusts (REITs) displayed notable performance in the quarter ending June 2023. The Embassy Office Parks REIT, boasting a total area of 45.0 million square feet, reported an 85% occupancy rate and notable incremental leasing of 407,000 square feet. In the same vein, Mindspace Business Parks REIT demonstrated an 89% occupancy rate and incremental leasing of 380,000 square feet. The Brookfield India REIT, with a total area of 18.7 million square feet, achieved an identical 89% occupancy rate and incremental leasing of 300,000 square feet.

    Financial metrics for these REITs underscored their strong performance and stability. Embassy Office Parks REIT reported a Net Operating Income (NOI) of INR 7,376 million and EBITDA of INR 7,336 million. Mindspace Business Parks REIT achieved an NOI of INR 4,570 million and EBITDA of INR 4,343 million, while the Brookfield India REIT recorded an NOI of INR 2,453 million and EBITDA of INR 2,374 million. These REITs offered competitive dividend yields ranging from 5.8% to 7.4%.

    Despite the challenges posed by global economic recessionary concerns and geopolitical uncertainties, the Indian real estate sector continues to be a magnet for substantial investments. The commercial office segment, as well as the impressive performance of REITs, are driving forces behind this growth. Both foreign and domestic institutional investors remain optimistic about the sector’s potential for returns and stability.

    Please note that this information is derived from data provided by Savills India Research and REIT Quarterly Filings.

    About Savills India: Savills India is a prominent international property consulting firm with full-service offices in Bengaluru, Mumbai, Delhi-NCR, Chennai, Pune, Hyderabad, and Ahmedabad. Established in 2016, the company offers a wide range of services, including office leasing, project management, capital markets, valuations, research, consulting, industrial and logistics, and residential services. With over 600 professionals, Savills India serves occupiers, investors, and real estate developers.

    Also Read: Embassy Office Parks REIT Reports 4% YoY Growth in Net Operating Revenue, Revises Leasing Guidance for FY2024

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