Private Equity Investments in Indian Real Estate Sector Decline by 4% in First Half of FY25
Private equity investments in the Indian real estate sector have witnessed a decline of 4% to $2.3 billion during the first half of the current fiscal year, as reported by Anarock, a real estate consultancy. This reduction in inflows can be primarily attributed to a decrease in investments in office assets. While the number of deals dropped to 17 during the period of April to September this year, down from 24 in the same period last year, it’s worth noting that overall investment figures and foreign investors’ dominance in the Indian real estate market have remained relatively stable.
Factors Behind the Decline
Shobhit Agarwal, Managing Director and CEO of ANAROCK Capital, explained that the decline in private equity investments in office assets can be attributed to several global factors, including geopolitical tensions and high interest rates. He emphasized that such investments are primarily driven by foreign investors, who may be exercising caution due to the aforementioned factors. However, despite this decline, significant investments in Reliance Retail’s warehousing assets by ADIA and KKR have helped maintain stability in the overall investment figures.
Resilience of the Indian Real Estate Market
The report by Anarock highlights the resilience of the Indian real estate market, with private equity investments remaining a dominant force. The figures for the first half of fiscal year 2025 showcase a gradual progression over the years: $1.2 billion in FY21, $2 billion in FY22, $2.8 billion in FY23, $2.4 billion in FY24, and finally, $2.3 billion in FY25 (H1). Moreover, the average deal size has witnessed a remarkable 23% year-on-year increase, driven primarily by the Reliance-ADIA/KKR warehousing transaction, which accounted for 67% of the total investments during this period.
Foreign Investor Dominance
The report further delves into the origin of investments in the Indian real estate sector. Anarock notes that a staggering 87% of the total private equity investments during the first half of FY25 came from foreign investors. This demonstrates the continued attractiveness of the Indian real estate market for global capital deployment.
Rise of Industrial and Logistics Sector
Industrial and logistics assets have emerged as the top-performers in terms of attracting private equity investments. The sector has accounted for a significant 67% of the total investments, massively outperforming both the office and residential sectors, which each attracted a mere 17% of the investments. It’s worth noting the stark contrast between these sectors, with private equity investments in the office sector falling by a staggering 79%, while the industrial and logistics sector witnessed an impressive 378% growth in investments compared to the same period last year.
Conclusion
Despite a decline in private equity investments in the Indian real estate sector during the first half of FY25, the market continues to show resilience. The domination of foreign investors remains intact, and the rise of the industrial and logistics sector has proven its promise as a sound investment opportunity. While the global factors impacting the reduction in investments in office assets serve as a temporary setback, the overall stability coupled with the tendency of investors to continually seek out opportunities bodes well for the future trajectory of the real estate market in India.
