India’s private equity investment in real estate to reach $5 billion

V Nagarajan

The Indian real estate sector received private equity (PE) investments of $4.2 billion across office, warehousing, residential and retail sectors till September this year.

It has been projected that the total private equity investments in India will touch $5.0 billion for 2022, a 19 per cent YoY decline, based on analysis of the effect of variables on investments, according to a survey by property consultant Knight Frank India.

On a YoY basis, private equity investments declined 25 per cent from $5.6 billion registered in 9M 2021 as most of the segments observed a drop in investments.

Rising inflation, higher interest rates, and geopolitical unrest, all of these contributed to a spike in volatility and slowdown in private equity PE transactions.

In terms of average transaction size, the sector saw average deals of USD 191 million in 9M 2022, 53 per cent higher than the average deal size of $125 million in the same period in the previous year. 9M 2022 recorded 22 transactions, compared to 45 transactions at the same time in the previous year.

Foreign private equity investors continued to remain the largest contributors.

During 9M 2022, the office sector accounted for 55 per cent of all private equity investments, followed by warehousing (29 per cent), residential (9 per cent), and retail (7 per cent).

Mumbai received the highest investments across sectors accounting for 60 per cent of the total investments in 9M 2022, followed by Bengaluru with 17 per cent of the total investment pie While residential investments declined 63 per cent YoY in 9M 2022, office sector maintained its spot as the most favoured segment with $2.3 billion investment till September this year.

Investments in retail segment plunged 63 per cent YoY in 9M 2022.

However, the retail sector will continue to observe capital commitments from investment platforms that remain bullish on its growth prospects, eyeing retail sales’ buoyancy arising from prolonged pandemic stress.

PE Investments in Warehousing grew 11 per cent YoY in 9M 2022 to $1.2 billion registering strongest growth compared to other segments. Robust demand for warehousing and logistics spaces amidst pandemic and a dearth of organised assets led to several Greenfield investments during the year.

The outlook for the warehousing segment remains positive with the segment registering occupier demand of 51.3 million sq ft in FY2022, rising by 62 per cent YoY, underscoring the strength of the market.

Outlook According to prior analysis, the projection has been made on the overall private equity investments in India at $6.9 billion in 2022, based on the correlation of government investment, currency movement, inflation, interest rate, and office supply to PE investments in India.

However, with overshooting of underlying variables of inflation, exchange rate, and interest rate owning to the evolving geopolitical scenario and strong monetary policy actions in the developed markets, the earlier projection has been revised downward.

Going forward, as global headwinds settle, resilience displayed by the Indian economy and favourable unit economics of the real estate assets will play a role in PE investment activity in the sector.

I have remitted funds for allotment of a flat in a project in Mumbai but the developer has not allotted the desired flat and refunded the money. Can I repatriate the money if I do not wish to invest further in India? Sharan Gauda, Sharjah

The authorised dealer will allow you to credit refund of application money made for allotment of flat when it is not allotted.

It will be allowed to be credited to NRE/FCNR account, together with interest, provided the original payment was made out of your NRE/FCNR account or remittance from outside India through normal banking channels and the authorised dealer is satisfied about the genuineness of the transaction.

I am planning to return to India in a year or two. I have invested in overseas property during my stay abroad. Can I retain the assets abroad after returning to India? Dharmadev, Dubai.

Yes. You can retain the assets abroad even after returning to India for settlement. As per FEMA, a person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security, or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.