PE investments in the real estate industry fell by 95% in the first quarter

Private equity investment in India’s real estate sector fell precipitously during the first quarter of 2023, with only $0.05 billion (or 370 crores) spent, a startling 95% decrease from the $1 billion invested during the same time in 2022.

Due to growing concerns about a global recession, rising capital costs, and a mismatch in investors’ and sellers’ expectations of valuation, investment activity has been muted, according to a Savills analysis. These factors have made it difficult for money to be deployed in India. The general uncertainty in India’s office leasing demand has been exacerbated by recent occurrences, such as Silicon Valley Bank’s failure and the spread of the disease to other mid-market US banks.

“Another reason that would cause dampened investment volumes is the decreased global funding available for residential credit and the development of office assets, which are dominant real estate goods in India.

However, there is a high need for investments in the key industries of offices, stores, warehouses, data centers, and life sciences. According to Diwakar Rana, Managing Director, Capital Markets, Savills India, “Indian real estate offers a great opportunity for strategic investments and significant returns with innovative investment forms tailored to contemporary requirements.

Investment activity in Q1 was mostly based in Mumbai and Pune and was funded by foreign capital. According to the research, Pune witnessed investments in office properties while Mumbai saw investments in ready-to-use industrial and warehousing assets.

The data shows that, with over 64% of the total investment, commercial office assets continued to be the best-performing sector in Q1 2023. The development office assets in Pune were the primary focus of all quarterly investments made by international institutional investors.

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