Private Equity investment: $ 1.8 billion for real estate in S1FY22
Private Equity (PE) fund investments in the Indian real estate market increased 27% year-on-year to $ 1.79 billion, or roughly Rs 13,500 crore, between April and September of this fiscal year (FY22 ), with investors showing confidence in the sector’s growth potential supported by strong fundamentals, particularly in the office rental and warehousing segments.
According to Anarock Property Consultants, commercial real estate (CRE) attracted the highest investments at 33%, followed by the industrial & logistics (30%) and residential (22%) segments. The top 10 deals in the first half of fiscal 22 contributed almost 81% of total private equity investments in the country.
Of the total PE inflows, CRE again attracted the bulk of investments to around $ 591 million. The logistics sector recorded significant investments of around $ 537 million in the first half of FY22, while the residential sector recorded investments of around $ 394 million. Data centers, land and mixed-use developments attracted the remaining 15% of overall entries, or 5% each.
However, the average ticket size for PE transactions declined 32% year-on-year, from $ 114 million in the first half of FY21 to $ 78 million in the first half of FY22. overall PE inflows into Indian rupees increased, the share of foreign funds decreased by 19% in S1 FY22 compared to S1 FY21.
“The data further revealed that while PE’s overall inflows into Indian real estate increased in the first half of FY2022, the share of foreign funds declined by 19% from the first half of FY21. National fund investments increased from less than $ 10 million in the first half of FY21 to $ 650 million in the first half of FY22, reflecting the improvement in the situation in the country resulting in more great confidence of national funds, ”said Anarock.
Foreign investors remained the main contributors with a share of around 63% of total inflows in the first half of FY22. However, in the same period of fiscal 2021, they contributed 99% of the shares. This indicates the growing confidence of domestic funds amid economic growth despite the second wave of Covid, he added.
Anarock Capital CEO Shobhit Agarwal said the average ticket size for PE transactions during the current period has declined 32% to $ 78 million in the first half of FY22 from $ 114 million in the first half. FY21. “In particular, this time investors preferred single-city agreements to multi-city agreements. As we can see, the share of multi-city transactions rose from 77% to 42% in the first half of fiscal year 2022, ”he added.
Speaking of trends, Agarwal pointed out that investors have maintained their confidence in listed REITs. After the market cap fell earlier this year, REITs have rebounded well. In addition, the demand for flexible offices is accelerating and they are expected to attract more private equity investments over the next 1-2 years.
“Operators are actively considering the expansion of data centers in major sites across the country. The residential sector is experiencing an acceleration in consumer demand in a context of growing preference for home ownership coupled with historically low mortgage rates. Investors will seek out various investment themes within this asset class, ”he added.