Private equity investments in real estate witnessed a 4% decline in the first half of FY25, primarily due to reduced investments in the offices sector, according to Anarock.
The total number of deals also declined from 24 (1H FY24) to 17 (1H FY25).
“Private equity investments in offices are primarily driven by foreign investors, which have tapered down due to global factors such as geopolitical tensions and elevated interest rates. However, the aggregate numbers and the dominance of foreign investors in Indian real estate remained largely stable due to the ADIA/KKR investment in the Reliance Retail warehousing assets,” said Shobhit Agarwal, MD and CEO, Anarock Capital.
The average deal size has risen by 23% year-on-year, primarily driven by the Reliance- ADIA/KKR warehousing deal which accounts for 67% of the total investments made in the first half of FY25. Additionally, the number of deals has decreased by 29%, contributing to the increase in the average ticket size.
Residential real estate accounted for 15% of transactions among the top 10 private equity deals. In comparison, the same period last year saw only about 4% of debt transactions in residential real estate within the top 10 deals.
Domestic and foreign investors upheld the same funding proportions as in the first half of the previous year, reflecting the continued dominance of foreign investors in Indian real estate investments.
H1 FY25 saw the industrial and logistics sector capture 67% of the total investments, significantly surpassing both the office and residential sectors (which attracted 17% each). While private equity investments in the office sector declined by 79%, the industrial and logistics sector saw a substantial 378% increase in investments compared to the same period in the previous financial year.
“The share of private equity investment in the residential sector has risen to 17%, up from 8% in the same period last year, reflecting increased activity in this segment,” says Aashiesh Agarwaal, SVP (Investment Advisory) Anarock Capital.
“However, stronger pre-sales and higher participation from PSU banks in construction finance are likely to reduce demand for high-cost financing from private equity. PE will need to target earlier stages of project life cycles to maintain the IRRs, or to deploy into special situations investments,” Agarwaal said.
The commercial office sector has long been a favoured choice for private equity investments; however, geopolitical tensions and rising interest rates could significantly impact these investments.
“Despite challenging global conditions, the office leasing market showed a strong performance this quarter, primarily fuelled by Global Capital Centres (GCCs) and flexible workspace solutions,” Shobhit Agarwal said.
The industrial and logistics sector continues to attract investors thanks to robust growth driven by manufacturing, ecommerce, consumption, and 3PL. This trend is being accentuated by a shift from Grade B properties to Grade A options due to a growing emphasis on quality, large formats, and ESG considerations. The interest in warehouses remains high, with steady supply of investment-grade properties and healthy demand institutional and HNI investors.
The total number of deals also declined from 24 (1H FY24) to 17 (1H FY25).
“Private equity investments in offices are primarily driven by foreign investors, which have tapered down due to global factors such as geopolitical tensions and elevated interest rates. However, the aggregate numbers and the dominance of foreign investors in Indian real estate remained largely stable due to the ADIA/KKR investment in the Reliance Retail warehousing assets,” said Shobhit Agarwal, MD and CEO, Anarock Capital.
The average deal size has risen by 23% year-on-year, primarily driven by the Reliance- ADIA/KKR warehousing deal which accounts for 67% of the total investments made in the first half of FY25. Additionally, the number of deals has decreased by 29%, contributing to the increase in the average ticket size.
Residential real estate accounted for 15% of transactions among the top 10 private equity deals. In comparison, the same period last year saw only about 4% of debt transactions in residential real estate within the top 10 deals.
Domestic and foreign investors upheld the same funding proportions as in the first half of the previous year, reflecting the continued dominance of foreign investors in Indian real estate investments.
H1 FY25 saw the industrial and logistics sector capture 67% of the total investments, significantly surpassing both the office and residential sectors (which attracted 17% each). While private equity investments in the office sector declined by 79%, the industrial and logistics sector saw a substantial 378% increase in investments compared to the same period in the previous financial year.
“The share of private equity investment in the residential sector has risen to 17%, up from 8% in the same period last year, reflecting increased activity in this segment,” says Aashiesh Agarwaal, SVP (Investment Advisory) Anarock Capital.
“However, stronger pre-sales and higher participation from PSU banks in construction finance are likely to reduce demand for high-cost financing from private equity. PE will need to target earlier stages of project life cycles to maintain the IRRs, or to deploy into special situations investments,” Agarwaal said.
The commercial office sector has long been a favoured choice for private equity investments; however, geopolitical tensions and rising interest rates could significantly impact these investments.
“Despite challenging global conditions, the office leasing market showed a strong performance this quarter, primarily fuelled by Global Capital Centres (GCCs) and flexible workspace solutions,” Shobhit Agarwal said.
The industrial and logistics sector continues to attract investors thanks to robust growth driven by manufacturing, ecommerce, consumption, and 3PL. This trend is being accentuated by a shift from Grade B properties to Grade A options due to a growing emphasis on quality, large formats, and ESG considerations. The interest in warehouses remains high, with steady supply of investment-grade properties and healthy demand institutional and HNI investors.
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