Hyderabad, April 18 (Agency) Private Equity (PE) investment inflows into the Indian real estate sector declined in the first quarter in 2023 compared to the corresponding period in the previous year, according to the latest report by Savills India, an international property consulting firm headquartered in London. PE investment in the Indian real estate sector amounted to USD 0.05 billion in Q1 2023 against USD 1.0 billion in Q1, 2022, the report revealed. “The dip in private equity investment inflows into the Indian real estate sector in Q1 is understandable, given the prevailing geo-political and economic global challenges and uncertainties, the reduced global capital available for residential credit and development of office assets, which are mainstream real estate products in India, is another factor that will result in muted investment volumes”, said Diwakar Rana, Managing Director, Capital Markets, Savills India.
However, the demand for investing in core office, core retail, warehousing, data centres and life sciences is extremely strong. Indian Real Estate offers huge potential for strategic investments and significant returns with new investment formats aligned to current requirements, Diwakar added. The data indicates that commercial office assets remained the top performer in Q1 2023, capturing approximately 64 percent of the total investment. All the quarterly investments originated from foreign institutional investors and were focused on development office assets in Pune, the report said. The report suggested that all investment activity came from foreign funds and was concentrated in the Western region of India, particularly Mumbai and Pune.
Mumbai saw investments in ready industrial and warehousing assets, whereas Pune experienced investments in office assets. The investment activity has been subdued due to growing global recession concerns, rising capital costs, and a mismatch in valuation expectations between sellers and investors, which have become significant hindrances to capital deployment in India. The recent events in the global financial world, including the collapse of Silicon Valley Bank and contagion spreading to other mid-market US banks, have contributed to the overall uncertainty in India’s office leasing demand, the report added.