Office sector claims 57% of Indian real estate PE deals in FY24

Commercial realty leads: The commercial real estate segment asserted its dominance in private equity transactions within the Indian real estate sector, accounting for a 57 per cent value share In the fiscal year 2024, according to the latest Anarock Capital FLUX report.

The report highlights a decline in the aggregate value of private equity deals over the past five years, dropping from $5.1 billion in FY20 to $3.7 billion in FY24. Contributing to this decline is the reduced activity by foreign investors, attributed to global macro-economic factors and geopolitical uncertainties.

Foreign investment declines

The share of foreign capital in total investments decreased to 65 per cent in FY24 from 78 per cent in FY20, while domestic investors stepped up, accounting for 29 per cent of the total capital inflows in FY24, a significant increase from merely 8 per cent in FY20.

The top 10 private equity deals in FY24 saw an increase in their share, primarily driven by the $1.4 billion GIC-Brookfield deal, representing approximately 40 per cent of the overall deal value for the fiscal year. Additionally, while the number of deals remained relatively constant, the aggregate deal value decreased due to a significant reduction in the average deal size, down by 30 per cent to $75 million in FY24 from $107 million in FY20.

Multi-city deals thrive

Multi-city transactions emerged as a focal point during FY24, with the GIC-Brookfield deal and the capital raised by Prestige Estates taking centre stage. The National Capital Region (NCR) witnessed a decrease in activity, while the Mumbai Metropolitan Region (MMR) continued to dominate city-specific deal tables.

Furthermore, the report underscores a preference for equity investments by private equity investors, with equity deals consistently representing around 75 per cent of total investments over the past five years. Asset class-wise, commercial offices emerged as the frontrunner in FY24, capturing a substantial 57 per cent value share, propelled by the GIC-Brookfield deal. However, residential real estate witnessed a decline in aggregate investment compared to FY23, despite maintaining a consistent share of private equity investments at 28 per cent year-on-year.

Aashiesh Agarwaal, Senior Vice President of Research & Investment Advisory at Anarock Capital, highlighted the resilience of the residential real estate sector, attributing its performance to increased project launches, sales volumes, and price appreciation. Meanwhile, the commercial real estate segment faced challenges such as delayed SEZ amendments and global uncertainties, despite strong demand fundamentals.

Logistics sector outlook

Looking ahead, the industrial & logistics segment is poised for growth, fuelled by robust consumption and expectations of manufacturing-led expansion. Moreover, regulatory changes, such as the notification of amendments to REIT regulations allowing for Small and Medium Real Estate Investment Trusts (SM REITs), are expected to further shape the landscape of the Indian real estate sector.

While private equity investments in Indian real estate experienced a decline in aggregate value, shifts in investor preferences and regulatory reforms are set to influence the sector's trajectory in the coming years.