According to a report by real estate services firm ANAROCK Capital, private equity (PE) inflows into Indian real estate grew 40% year-on-year to $2.8 billion in the first half of the current fiscal, driven by global headwinds. However, PE investments in the sector were still down 32% from the pre-Covid level of $4.1 billion during April-September 2019, the report said.
The contribution of the top 10 deals to the total PE investment increased to 86% in 2021 from 80% in the same period. These included a $700 million investment in Tata Realty and Infrastructure and a $660 million investment by the Canada Pension Plan Investment Board. in Bharti Enterprises.
In addition, the average ticket size of deals increased to $121 million in H1FY23 compared to $75 million in H1FY22 (April-September 2021) and $106 million in H2FY22 (October 2021-March 2022). The report attributed the increased ticket size to investors shifting more towards multi-city deals and joint-venture (JV) platforms.
Capital inflows were strong in the National Capital Region (NCR), with investments up 60% in H1FY23 compared to H2FY22 on account of joint venture platform deals. The combined size of deals in this area increased to $942 million from $181 million in H1FY22 and $590 million in H2FY22. This marks a turnaround as private equity investors focused strongly on the Mumbai metropolitan area in 2021-22.
Meanwhile, equity funding dominates the PE funding mix in real estate, with a healthy 79% stake, which is 300 basis points higher than H1FY22. Further, investment by foreign investors stood at around 78%, indicating strong confidence in the sector.
The asset-wise funding pattern reflects an improvement in demand and confidence in the commercial sector after the pandemic. PE investments in the sector stood at $1.86 billion in the first half of FY13, which is almost equal to last year’s total investment. Its share in investments has increased to 67 per cent, from 18 per cent in the first half of FY22 and 56 per cent in the second half of FY22.
“With many corporates moving from work from home to hybrid mode, the demand and confidence in the commercial space has revived and this is expected to continue for the next few quarters,” the report said.
The residential property class reported $372 million of PE investments, compared to $378 million in H1FY22 and $390 million in H2FY22. However, the report noted that demand in the residential sector was rising due to a significant improvement in home-ownership sentiments amid work-from-home and hybrid work policies by many companies.
The report said investment in retail is expected to remain subdued for the next few quarters, unless physical buying returns to more promising levels.
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