Private Equity deal activity in Indian Real Estate declines in Q1 FY24

During the first quarter of the current financial year (Q1 FY 2024), reported private equity (PE) deal activity in India, experienced a slight decline compared to the same period the previous year. In Q1 FY 2024, PE investments in real estate amounted to $1.9 billion, down from $2 billion in Q1 FY 2023.

ANAROCK Capital's report FLUX for Q1 FY24 revealed that the overall deal numbers were boosted by a significant transaction totalling $1.4 billion, namely the Brookfield India RE Trust REIT - GIC transaction. This particular deal accounted for approximately 75 per cent of the total deal activity during the period.

Shobhit Agarwal, MD and CEO of ANAROCK Capital, explained that excluding this deal, private equity activity remained subdued due to a high-interest rate environment and global uncertainties. Agarwal further mentioned that foreign investors tend to focus on equity investments in office assets, which already tilts the scale in favour of office assets in Indian real estate. The single large deal between the consortium of GIC and Brookfield REIT with Brookfield AMC further skewed the mix during the quarter.

The average ticket size for deals in Q1 FY24 notably increased to $192 million from $100 million in FY 2023. This increase was primarily attributed to the significant transaction mentioned earlier. The report states that the global economic environment continues to be uncertain, particularly due to elevated interest rates. Consequently, excluding the Brookfield-GIC transaction, deal volumes remained subdued in the quarter.

In terms of asset class wise funding, the commercial real estate sector experienced significant activity in Q1 FY24, mainly driven by the Brookfield-GIC transaction. The commercial real estate sector received 90 per cent of the funding in Q1 FY 2024, compared to 68 per cent in Q1 FY 2023. Meanwhile, residential real estate received 6 per cent of the funding, while industrial and logistics received 4 per cent.

Foreign investors continued to dominate investment activity in Q1 FY24, much like in Q1 FY23. They accounted for 94 per cent of the activity during this period, indicating their sustained interest and participation in the Indian market. In Q1 FY 2023, foreign investors had contributed 90 per cent of the activity.

Gagan Randev, Executive Director of India Sotheby's International Realty, attributed the slight decline in PE investment during the April-June quarter to the temporary slowdown and disruptions in the global economy. The rise in interest rates had severely affected investments in office assets in North America, resulting in market upheaval there. However, Randev expressed optimism that this phase would be transient, anticipating an increase in PE investment in the upcoming quarter.