Private equity investment inflows into the Indian real estate sector amounted to $45 million (Rs 3.7 billion) in the first quarter (Q1) of 2023, says the latest report released by the property consulting firm Savills India. This marks a significant YoY decrease in the investment activity as compared to the private equity investment inflow of $1 billion in Q1 2022.
The data indicate that commercial office assets remained the top performer in Q1 2023, accounting for approximately 64% of the total investment. 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.
The report suggests 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 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, “The dip in private equity 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.”
