The real estate sector in India received $1,180 million in Q1 2022, recording a growth of 98 percent q-o-q over Q4 2021 which had received PE investments of $597 million. Office remained the favoured asset class attracting $2,882 million in CY 2021 while in Q1 2022 the sector attracted $732 million, a report by Knight Frank said on May 23.
The real estate sector is expected to receive PE investments of an estimated $6.8 billion in the calendar year of 2022, it said.
In 2021 (calendar year) the total private equity investment (equity + debt) was recorded at $6,199 million, recording a rise of 57 percent YoY over 2020. Since 2011 the real estate sector received cumulative PE investments of over $50 billion.
The office sector received 62 percent of the private equity investments in Q1 2022, followed by retail (21 percent), warehousing (10 percent) and residential (6 percent).
From the perspective of annual numbers, the calendar year 2021 witnessed a surge of 57 percent to $6,199 million when compared to $3,945 million received in CY 2020. Office constituted 46 percent of the private equity investments in 2021, followed by warehousing (21 percent), residential (19 percent) and retail (13 percent). The number of deals went up from 20 in 2020 to 52 in 2021.
Knight Frank India estimates the capital markets to chart growth of 11 percent YoY to $6,884 million in the CY 2022, against the backdrop of interest rate trajectory moving northwards and resilient economic outlook for the country.
In 2021, the office real estate segment received investments worth $2,882 million from 14 deals, with a total transactable area recorded at 35.4 mn sq ft. Approximately, 68 percent of the investments were in new development and under-construction assets, unlike 86 percent in ready assets observed in 2016. The primary reason for this increase has been the lack of mature, transactable assets in the Indian office market. Bengaluru and Hyderabad led the investment scenario due to development stage transactions by leading global funds.
In Q1 2022, the total area of office assets transacted stood at 36.9 mn sq ft, driven largely by one big deal between Mindspace REIT and Middle East sovereign fund Abu Dhabi Investment Authority (ADIA). The increase in transacted area hinted towards improving appetite among investors for bigger spaces. The office assets recorded a transaction value of $732 million in Q1 2022 from three deals.
The sector has received investments worth $817 million in 2021 which is up by 271 percent YoY despite the COVID threat. PE investments in retail remained concentrated with two major deals in 2021: an investment by Blackstone in Prestige’s retail assets, and an investment by GIC and Canada Pension Plan Investment Board in Phoenix Mills.
The residential investments in Q1 2022 totalled $73 million, driven by a single deal
The pandemic-induced uptick in momentum in the residential segment with increasing thrust on homeownership drew interest from institutional investors during the year. The sector recorded $1,187 million in 2021, 223 percent higher compared to the year 2020. The residential sector showed confidence with exposure through risk capital/equity, which hit an all-time high of 81 percent in 2021.
The retail segment received investments worth $253 million in Q1 2022
The retail segment received investments worth $253 million in Q1 2022 that was led by a single deal. The total area of retail assets transacted in Q1 2022 was recorded to be 1.7 mnsq ft. The Abu Dhabi Investment Authority-backed Lake Shore India Advisory bought Viviana Mall in Thane from Singapore's Sovereign Wealth Fund GIC and realty developer Ashwin Sheth Group.
The retail sector is expected to observe capital commitments from investment platforms that remain bullish on its growth prospects, eyeing retail sales buoyancy arising from prolonged pandemic stress.
“While investors’ appetite remained strong across various real estate asset classes in 2021, escalating global tensions emanating from the Russia-Ukraine war and the influence of omicron in the early part of the year were seen inhibiting investment. Moving forward, push for infrastructure spending will accelerate investments in the next 3 quarters of the year 2022 to levels witnessed prior to the pandemic with estimated investments touching $6.8 billion,” said Shishir Baijal, chairman and managing director, Knight Frank India.
Investments in logistics and industrial segments witnessed robust growth in 2021 on the back of strong demand for this asset class supported by the need for quality warehouse spaces, rise in automation, and increased demand led by e-commerce and third-party logistics. The annual investment volume increased by 55 percent YoY to $1313 million compared to $848 million received in 2020.Robust demand for warehousing and logistics spaces amidst pandemic and a dearth of organised assets led to several greenfield investments during the year. In Q1 2022, investors pumped in $122 million, as confidence in the sector remained high, owing to the ever-increasing need for last-mile deliveries and logistics.