PE inflows into Mumbai realty drop sharply, NCR emerges as top favourite in 9MFY23: Anarock

PE inflows into Mumbai realty drop sharply, NCR emerges as top favourite in 9MFY23: Anarock
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  • PE firms pumped in $3.4 billion into Indian real estate in the first nine months of FY23.

  • PE inflows into the National Capital Region grew by 58%, while that of Mumbai Metropolitan Region dropped sharply.

  • Domestic investments grew by 61%, while the share of foreign funds in the total PE pie dropped in 9MFY23.
Private equity firms pumped in $3.4 billion into Indian real estate in the first nine months of FY23 ending December 2022. This is a modest increase over the same period the year before at $3.3 billion but fell short of investments made during the pandemic years which were above $5 billion, according to a report by Anarock investment banking.

PE investors also visibly shifted focus towards the National Capital Region (NCR) as they invested $1.2 billion in 9MFY23 – showing a 58% annual jump. On the other hand, inflows into Mumbai Metropolitan Region or MMR dropped sharply, reducing by over half from $574 million in 9MFY22 to $224 million in 9MFY23.

In fact even Chennai real estate received more capital inflows than Mumbai as PE inflows into this region jumped 6x to $268 million from $37 million a year before.

Office spaces remain PE favourite

The top ten deals accounted for 76% of the total value of PE investments in 9MFY23, and half of these big deals belonged to the commercial sector.

“With a rise in the hybrid work model and corporates expanding into tier 2 cities for their ease of working, demand and confidence in the commercial space has resurged,” said Shobhit Agarwal, MD & CEO of Anarock Capital.

The share of the commercial sector in PE inflows went up to 55% in 9 FY23 from 33% in 9M FY22. This can be attributed towards continued preference by investors in Grade A office assets with quality tenants, the report said.

Residential properties remained the next best assets with 23% share in total PE inflows.

“Confidence in the residential sector is also high currently and will remain constant on the back of strong continued homeownership sentiment,” said Agarwal.

Going ahead, Agarwal hopes that sectors like retail where PE investments were subdued this financial year, will pick up as physical shopping makes a comeback. “Thanks to the buoyant manufacturing sector, favourable government policies and the booming 3PL sector, high momentum is expected in the industrial and logistics sector in the future,” he added.

Also, the average ticket size of investments has increased from $82 million in 9MFY22 to $91 million in 9M FY23. “This is largely due to deployment of funds by JV platforms and investor interest gradually shifting towards emerging asset classes of real estate,” the Anarock report said.

Top 10 PE Deals in 9M FY23
Capital ProviderRecipientLocationAsset ClassDeal Amount (USD Mn)Debt or Equity
CPPIBTRILMultipleCommercial 700Equity
BrookfieldBharti EnterprisesNCRCommercial 660Equity
HDFC Capital AdvisorsShapoorji PallonjiMultipleResidential 194Debt
Axis AMCTishman SpeyerMultipleCommercial 188Equity
CapitaLand InvestmentCapitaLand DevelopmentChennaiCommercial 177Equity
Bain CapitalTARC (Anant Raj)NCRResidential 175Debt
BrookfieldIL&FSMMRCommercial 137Equity
BrookfieldL&T Metro Rail(Larson & Toubro)HyderabadLand 129Equity
Credit SuisseAdani PropertiesMultipleMixed Use 101Debt
BlackstoneVertical WarehousingNCRLogistics & Warehousing 88Equity

Source: Anarock Capital

Domestic investors turn active

The mix of PE investors is also skewed towards domestic investors. While foreign Investments have dropped to 71% of the total pie in 9MFY23, that of domestic investors’ rose to 28% from 18% a year before.

Domestic investments increased by 61% of the total PE capital inflows in Indian real estate in 9MFY23 at $948 million compared to $587 million in 9MFY22, indicating higher confidence by domestic funds, the report said.

A recent report by Colliers on institutional investments in real estate also said that domestic investors had turned more active in 2022. The share of domestic investment inflows constituted 22% of the share in total inflows.

“Large global investors will continue to partner with domestic firms to set up investment platforms,” Vimal Nadar, senior director and head of research, Colliers India.

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