PE investments in real estate stable at $4.2 bn in FY23: Anarock

Private equity investments in real estate have remained stable during FY23 as compared to FY22 at $4.2 billion, a report 'FLUX' by real estate consulting firm Anarock shows.

The deals tracked by Anarock show commercial real estate and industrial and logistics attracted pan India platforms, with larger deal values (>$500 million), while the residential sector attracted smaller ticket platform deals ($50 million - $125 million) and was more regional in nature.

The overall PE investments stood at $7.2 billion in FY21, which were down at $6.3 billion during the Covid period in FY20 and $5.3 billion in FY19.

The top 10 deals accounted for 69% of the total value of PE investments in FY23 -- largely stable compared to 67% in FY22. 

Anarock says the average ticket size declined from $86 million in FY22 to $72 million in FY23, largely driven by increased activity in residential real estate, where deal sizes tend to be smaller.

Between equity and debt funding, equity investment seems to be the preferred way as its share stood at 67% in FY23. "Increased activity in residential real estate is reflected in a higher share of debt at 33% in FY23, compared to 20% in FY22," says the report.

Between domestic and foreign funding, domestic investors have been significantly more active in FY23, with total value increasing by 50% in FY23 ($0.9 billion) over FY22 ($0.6 billion). 

At the same time, foreign investors have seen incremental investments decline by 7% to $3.2 billion in FY23, from $3.4 billion in FY22. Consequently, the share of domestic private equity investors in Indian real estate increased from 14% in FY22 to 22% in FY23.

In terms of the movement of capital inflow in the country's states, NCR markets were a key attraction for PE players with 32% of total PE inflows in FY23 at $1,316 million, up from a share of 18% in FY22. 

Chennai accounted for 1% of total private equity inflows in FY22, which has risen to 8% of total PE inflows in FY23. "NCR, Chennai, Bengaluru & Hyderabad witnessed increased activity levels in FY23, while MMR, multi-city deals and other cities witnessed lower activity levels than in FY22," the report adds.

In terms of asset-class funding, Anarock data shows commercial real estate investments grabbing the biggest pie in FY23 at 40%, followed by residential at 29%. "Industrial & Logistics saw subdued activity post a robust FY22 and muted demand in FY23, especially from e-commerce players," the report adds.

In FY23, there was a keen interest in platform deals, with a total value of $4.5 billion. Most of the large ticket platform deals were in rent-generating assets (offices and warehouses) for pan-India developments, while the smaller ticket items were largely for residential developments in southern cities of India. Offices continued to dominate the large ticket equity transactions, while residential projects continued to dominate debt instruments in FY23.