Private Equity Inflow In Indian Real Estate Falls 95% To $45 Million In March Quarter

Private equity investment into Indian real estate fell sharply by 95% in January-March to $45 million amid global uncertainties, according to property consultant Savills India.

PE investment stood at $1 billion in the year-ago period.

"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," Savills said in a report.

Furthermore, recent events in the global financial world, including the collapse of Silicon Valley Bank and the contagion spreading to other mid-market U.S. banks, have contributed to the overall uncertainty in India's office leasing demand, it said.

"The dip in private equity investment inflows into the Indian real estate sector in Q1 is understandable, given the prevailing geopolitical and economic global challenges and uncertainties," said Diwakar Rana, Managing Director, Capital Markets, Savills India.

The reduced global capital available for residential credit and the development of office assets, which are mainstream real estate products in India, is another factor that will result in muted investment volumes, he said.

"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," Rana said.

The data indicate that commercial office assets remained the top performer in Q1 2023, capturing about 64% of the total investment, Savills said.