The Indian real estate sector received $45 million private equity (PE) investments in the first quarter (Q1) of 2023, according to a report by Savills India, an international property consulting firm.
The data indicates that commercial office assets remained the top performer in Q1 2023, capturing approximately 64 percent of the total investment. All the quarterly investments originated from foreign institutional investors (FIIs) and were focused on development of office assets in Pune, the report stated.
The report further suggests that all investment activity came from foreign funds and was concentrated in the western region of India, particularly Mumbai and Pune. Mumbai saw investments in ready industrial and warehousing assets, whereas Pune experienced investments in office assets.
According to the report, the real estate sector received $45 million PE investment in Q1 2023, compared to $1 bn in Q1 2022.
India’s real estate sector received PE investments at $3.4 billion in 2021 and 2022, while in 2018, 2019 and 2020 the figures were $6 billion, $6.7 billion and $6.6 billion respectively, the report showed.
It said that the investment activity has been subdued due to growing global recession concerns, rising capital costs and a mismatch in valuation expectations between sellers and investors.
Furthermore, recent events in the global financial world, including the collapse of Silicon Valley Bank (SVB) and the contagion spreading to other mid-market US banks, have contributed to the overall uncertainty in India's office leasing demand.
Diwakar Rana, Managing Director, Capital Markets, Savills India, said that the dip in PE investment inflows into the Indian real estate sector in Q1 is understandable, given the prevailing geo-political and economic global challenges and uncertainties.
“The reduced global capital available for residential credit and development of office assets, which are mainstream real estate products in India, is another factor that will result in muted investment volumes. However, the demand for investing in core office, core retail, warehousing, data centres and life sciences is extremely strong. Indian real estate offers huge potential for strategic investments and significant returns with new investment formats aligned to current requirements,” Rana said in a statement.
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