Private equity (PE) investment activity in the real estate sector declined 5 percent year-on-year in April-June to $1.9 billion on account of increasing interest rates, a report by real estate consultancy Anarock said on July 10.

In a report titled 'FLUX Q1 FY24 Market Monitor for Capital Flows in Indian Real Estate', it said that PE inflows stood at $2 billion in the year-ago period.

The first quarter of this fiscal saw a mild softening in reported deal activity compared to the same quarter a year earlier on a headline basis, it said, adding that the reported numbers were propped up by a single large deal which accounted for about three-fourths of the overall deal activity.

As per the data, foreign investors accounted for 94 percent of the PE investments, while the share of domestic funds was 6 percent. PE funding remained dominated in the form of equity, which contributed 94 percent to the total inflow.

Referring to the large big-ticket transaction, Shobhit Agarwal, managing director and chief executive officer, ANAROCK Capital, said, “Excluding this deal, private equity activity remained subdued owing to a high interest rate environment and global uncertainties. PE transactions in Indian real estate are, in any case, tilted towards equity investments in office assets by foreign investors. The single large deal between the consortium of GIC and Brookfield REIT with Brookfield AMC has further skewed the mix during the quarter.”

GIC is the Singapore government's sovereign wealth fund. REIT stands for real estate investment trust, and AMC for asset management company.

The share of this top PE deal is 74 percent of the total PE deals in Q1FY24. The global economic environment remains uncertain against the backdrop of elevated interest rates. Consequently, it is not surprising that deal volumes, with the exclusion of the Brookfield-GIC transaction, were soft in the quarter gone by, the report added.

“The slight decline in PE investment during the April-June quarter can be attributed to the temporary slowdown and disruptions in the global economy. Investments in office assets have been severely affected in North America by the sharp rise in interest rates and this has resulted in an upheaval in the markets there,” said Gagan Randev, executive director, India, Sotheby's International Realty.