Real estate private equity (PE) investments declined 32 percent in financial year 2022 partly due to the second wave of COVID-19 leading to multiple lockdowns in various parts of the country and serious economic disruptions in almost all industries, an Anarock Capital report said.
The office sector drew the most PE accounting for 38 percent of investments, industrial and logistics sector 22 percent and residential just 14 percent, the report said.
The financial year 2022 also saw a huge drop of 42 percent in average deal size, though still higher than financial year 2018. The drop in size is largely due to investors' focus shifting back to individual assets from portfolio deals in financial year 2021.
Unlike financial year 2021, investors in financial year 2022 preferred single city deals to multi-city ones, reducing the share of the latter by nearly 70 percent, the report said.
"Equity continues to remain around 80 percent of total PE investments in Indian real estate. Investments by domestic funds doubled in financial year 2022 to $600 million. Increasing confidence of domestic funds reflects return of overall positivity after a harrowing year of pandemic disruption and uncertainty," said Shobhit Agarwal, MD & CEO of Anarock Capital.
The residential real estate sector continued to witness steady tailwinds of accelerated consumer demand for home ownership, coinciding with near historically low mortgage rates.
Industrial and logistics became the second most preferred asset class after commercial office; this trend is expected to grow considerably in the coming years.
The absence of portfolio deals resulted in average ticket size going back to financial year 2019 levels at $93 million, yet still higher than financial year 2018; and multiple deals slipped into the next financial year due to delays.
Domestic PE investors showcased higher confidence - their contribution increased from five percent in financial year 2021 to 14 percent next year, higher than financial year 2018.
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