Year Ender 2024: Industrial & logistics sector fuels 10% growth in PE investments

Foreign institutional investors accounted for 88 percent of the total investment activity in 2024, reinforcing their dominant role in driving growth in the real estate sector.

Market observers said that despite geopolitical challenges, high global inflation and economic recessionary concerns, private equity investments maintained the momentum, offering favourable opportunities for both global and domestic institutional investors. Driven by India's strong economic growth, 2024 witnessed a steady resurgence in investor confidence in the Indian real estate market.

Data showed that though the office sector saw a decline in its share, it remained resilient at 29 percent of total PE investment, supported by the gradual return to workplaces and increasing office space absorption.

Arvind Nandan, Managing Director, Research & Consulting, Savills India, said that private equity investments in Indian real estate have shown remarkable resilience amid global uncertainties, reflecting a strategic shift towards diversification.

“The recent trends indicate India's growing role as a supply chain hub, positioning the industrial and logistics sector at the forefront of PE inflows. While the commercial office segment continues to attract steady interest, the rise in demand for premium housing has also positioned the residential sector as a key investment avenue,” he said.

Niranjan Hiranandani, Chairman, National Real Estate Development Council (NAREDCO) said that the robust PE funding growth underscores the sector's robust appeal, with foreign institutional investors accounting for an impressive 88 percent of total investments, reinforcing their continued dominance in the market.

"Significantly, the industrial and logistics sector secured the highest share of PE investments. This bullish outlook can be attributed to the availability of Grade A assets in the peripheral cities of major metros, bolstered by last-mile connectivity through multi-modal transit infrastructure. This development is expected to reduce logistics costs, enhance India's global competitiveness, and support manufacturing growth aligned with the 'PLI' and 'Make in India' schemes," he said.

Key investment transactions

According to Savills India, some of the key investment transactions in India during 2024 include a $1,537 million partnership investment by the Abu Dhabi Investment Authority (ADIA) and KKR in Reliance Retail Ventures Limited.

Another transaction includes a $263 million partnership investment by GIC and Xander Investment Management in a venture with the Shapoorji Pallonji Group and Allianz Group. A $203 million investment by Blackstone in logistics firm LOGOS India marks the third key investment transaction in Indian real estate sector.

Outlook

Experts projects private equity investments in real estate to reach $4.5 billion to $5 billion in 2025. Amidst limited investible grade assets, the office segment might see muted investments, while alternative sectors like life sciences and data centres are poised for prominence.

Nandan said that the industrial and logistics sector is expected to remain a key focus area as India strengthens its position as a global logistics hub. The rise of Alternative Investment Funds (AIFs) is likely to bring a structural shift in the investment landscape, with emerging sectors gaining prominence.

“Looking ahead, we expect sustained growth in private equity inflows, with foreign institutional investors playing a dominant role. The growing adoption of REITs will also play a key role in shaping the future of the real estate investment landscape,” he said.