Private equity (PE) investment inflows into the Indian real estate sector in the first quarter of calendar 2023 have dropped dramatically to $45 million from $1 billion in the corresponding quarter a year earlier, said Savills India, an international property consulting firm, here on Wednesday.
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, it said.
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, Savills India confirmed.
“The dip in private equity investment inflows into the Indian real estate sector in Q1 is understandable, given the prevailing geo-political and economic global challenges and market uncertainties,’‘ said Diwakar Rana, Managing Director, Capital Markets, Savills India.
The reduced global capital available for residential credit and development of office assets, which are mainstream real estate products in India, was another factor that resulted in muted investment volumes, he added.
“However, the demand for investing in core office, core retail, warehousing, data centres and life sciences remains strong. Indian real estate offers huge potential for strategic investments and significant returns with new investment formats aligned to current requirements,’‘ Mr. Rana added.
Data released by the realty consulting firm indicated that commercial office assets remained the top performer in Q1 2023, capturing approximately 64% of the total investment. All the quarterly investments originated from foreign institutional investors and were focused on development office assets in Pune while Mumbai saw investments in ready industrial and warehousing assets, according to the firm.
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