FY24 real estate shake-up: Private equity investments tumble 26%

PE investments decline: Real estate investments from private equity sources have experienced a notable decline of around 26 per cent during the first nine months of fiscal year 2024 (FY24). This downturn is attributed to reduced activity from both domestic and foreign investors, with global geopolitical uncertainties and a high-interest rate environment hampering foreign investment. The findings come from Anarock Capital's FLUX report for 9M FY24.

MMR capital leader

The Mumbai Metropolitan Region (MMR) emerged as the leader in capital inflow, securing $694 million in investments during 9M FY24, an increase from $375 million in the same period of FY23. Multi-city transactions saw a surge, primarily driven by transactions involving Brookfield India REIT and GIC.

The preference for equity investments by private equity (PE) investors remains evident, constituting 84 per cent of the share. The commercial real estate sector witnessed a rise in PE deals during 9M FY24, partly due to a large transaction, while activity in the residential real estate sector declined.

AIFs face constraints

Domestic Alternate Investment Funds experienced lower activity, particularly in the residential real estate debt category, as demand for high-cost funds diminished. Strong residential pre-sales and a favourable stance by state-owned banks contributed to reduced capital demand from more expensive AIFs.

The top 10 PE deals in 9M FY24 accounted for 87 per cent of the total PE investments, compared to 76 per cent in 9M FY23. The average ticket size increased marginally to $95 million in 9M FY24, up from $91 million in the previous fiscal year, largely driven by a substantial deal involving Brookfield India Real Estate Trust REIT and Singapore’s sovereign wealth fund GIC.

Foreign investors contributed to 86 per cent of total investments in 9M FY24, up from 79 per cent in the same period of the previous fiscal year. Correspondingly, domestic investments decreased to 14 per cent of the total capital inflows into Indian real estate during 9M FY24, amounting to $360 million, compared to $717 million in 9M FY23 Anarock.