Knight Frank Report: Post-Covid Dip Sees 10% Decline in Real Estate FDI and FPI in 2022

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    Foreign direct investment (FDI) in the real estate sector experienced a 10% decline in the year 2022, dropping below pre-Covid levels, according to a report by property consultancy firm Knight Frank. Despite this decrease, it’s worth noting that foreign investment constitutes less than 2% of the total funds in the real estate domain, suggesting its impact is relatively limited. The report, titled ‘India Real Estate Vision 2047’, was unveiled during the National Real Estate Development Council’s (NAREDCO’s) Silver Jubilee foundation day conference held in Hyderabad on August 26.

    Both Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) in the real estate sector saw substantial reductions in the post-Covid era in 2022. Net FPI saw a decline from over $40 billion to slightly under $30 billion, while FDI experienced a significant drop to $16.7 billion.

    Vivek Rathi, National Director of Research at Knight Frank India, attributed the decline to a 10% reduction in private equity investment by foreign investors (FDI) in 2022, resulting in a lower figure than even the pre-pandemic period. Rathi noted that the current year is expected to witness investment levels similar to the previous year or possibly around 5% higher.

    Rathi, however, emphasized that the Indian real estate sector remains resilient, evident from robust real estate sales and the improved financial positions of Indian developers.

    Despite the dip in foreign investment, the Indian real estate market continues to thrive. This is evident not only in real estate sales but also in the improved financial stability of Indian developers due to reduced leveraging.

    As of now, FDI constitutes less than 2% of the overall investments in the sector. Rathi highlighted that India’s real estate industry is valued at nearly $480 billion, with foreign private equity accounting for less than $5 billion. Most of the funding for Indian real estate comes from domestic sources such as customer advances, banks, and non-banking financial institutions.

    It’s worth noting that while FDI in real estate faced a decline, the broader Indian real estate market remains sturdy and well-supported by domestic funding sources.

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