Private Equity Investments in Indian Real Estate Fall by 44% in 2023

Amid growing global uncertainty and a high interest rate environment, private equity investments in Indian real estate have seen a significant decline in 2023. As per a recent report by property consultant Knight Frank, there was a 44% drop in PE inflows into the sector compared to the previous year, with the amount shrinking to $3.0 billion.

Investment Decline Amidst Economic Headwinds

The Indian real estate landscape has traditionally attracted robust PE investments, but 2023 has been different. The total amount of private equity inflows reached just $3.0 billion across 23 deals from January 1 to December 12, in stark contrast to the $5.36 billion recorded in 2022. This downtrend is attributed to various external pressures, including geopolitical tensions and a series of interest rate hikes imposed by significant central banks such as the U.S. Federal Reserve and the Central Bank of Canada.

The Sectoral and Regional Impact

The composition of PE investments in real estate also changed, with office assets comprising a majority with 58%, followed by warehousing at 23%, and residential segments accounting for 19%. Notably, the retail sector did not secure any private equity deals throughout the year. Geographically, Mumbai topped the charts receiving $1.69 billion in investments, the National Capital Region was next with $835 million, and Bengaluru came in at $347 million. Despite the overall slump, investments from Singapore experienced a surge, contributing significantly over 50% to the total private equity inflow in the Indian real estate sector for 2023.

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