Real estate sector sees private equity investments slip 20% in first half of 2023

Real estate sector sees private equity investments slip 20% in first half of 2023
Source: Pixabay
  • PE inflows into real estate fell by 20% in the first half of 2023, as compared to last year.
  • Knight Frank predicts a rebound in the second half, which will help 2023 to see 5.3% growth.
  • The office sector took away over a lion’s share of the investments H1 2023, at $1.7 billion.
Private equity investors in India’s real estate sector have taken a measured approach in the first half of 2023. The inflows slipped by 20% in the period as compared to the year before, as per a report by Knight Frank. This in spite of strong economic growth seen in India in the last few quarters and high long-term confidence among global investors.

"We have witnessed a decline in the volume of investments over the past year due to the economic challenges faced worldwide, leading some large economies to take drastic fiscal and monetary policy measures. This has further caused investors to re-evaluate their strategies, at least in the short-term,” said Shishir Baijal, chairman & managing director of Knight Frank.

The consultancy says that the moderation in growth is limited considering the prevailing global concerns. It also expects a rebound in the second half of the year. Overall, PE investments in the Indian real estate sector are estimated to touch $5.6 billion in 2023, a 5.3% YoY growth, Knight Frank predicts.

Offices rule the PE sector

The office sector took away over a lion’s share of the investment pie — at 68%. This was followed by warehousing which accounted for 21% of the investments, while the residential sector received the lowest part of the share, at 11%.

“The India office sector continues to attract investors, particularly for ready income-yielding assets. Looking ahead, the office sector is expected to remain a favourite among investors, as it is likely to maintain its momentum in the short to mid-term," said Baijal.

PE investments into real estate sector in H12023
Asset classPE investments % of funds receivedNo of PE deals
Office$1,750 mn68%4
Warehousing$555 mn21%5
Residential$277 mn11%5
Total$2,582 mn 14
Source: Knight Frank

“The market demand for Grade A office space, particularly flexible office spaces, is witnessing a notable surge. The supply of Grade A office space is still lower than the existing demand, further contributing to the attractiveness of this market,” Amal Mishra, co-founder, Urban Vault, a Bengaluru based managed co-working space provider.

Mumbai received the highest investments accounting for 48%, NCR stood second at 32% and Bengaluru at 13%. The region of investors also shifted drastically as nearly 75% of investments came from Asian countries in H1 2023. In the same period last year, 86% of investments came from Canada and the US.

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