Private equity (PE) investments in the Indian real estate sector have witnessed a notable decline in the first half of fiscal year 2026, according to a recent report by ANAROCK Capital. The sector saw investments totaling $2.20 billion, marking a 15% year-on-year decrease compared to the same period in FY25.

Investment Trends and Deal Sizes

Despite the overall decline in PE activity, the average deal sizes have remained relatively stable, ranging between $60-100 million. This suggests that the decrease in total investment is primarily due to fewer transactions rather than smaller deal sizes.

Historical Context

The report highlights a consistent downward trend in PE investments in Indian real estate:

Regional Dynamics and Key Transactions

Mumbai's Mumbai Metropolitan Region (MMR) and Kolkata emerged as bright spots, showing growth in PE activity. Notable transactions include:

1. Kanakia-Hines-Mitsubishi-Sumitomo deal in MMR
2. Blackstone's acquisition of South City Mall in Kolkata

Interestingly, the share of the top 10 deals decreased to 77% from 93% in H1 FY25, indicating a more distributed transaction activity across the sector.

Investment Focus and Capital Sources

The investment landscape saw shifts in focus and capital sources:

Investor Interest

Despite the overall decline, certain sectors continued to attract investor interest:

• Residential
• Commercial
• Retail

This sustained interest is primarily driven by domestic demand and ongoing market formalization.

Conclusion

While the Indian real estate sector faces challenges with declining PE investments, the stability in deal sizes and the diversification of transaction activity provide some positive indicators. The shift in investment focus and the continued interest in key sectors suggest that investors are adapting to market conditions and focusing on areas with potential for growth and returns.

As the market continues to evolve, it will be crucial for investors and industry stakeholders to monitor these trends and adjust their strategies accordingly. The resilience of average deal sizes and the sustained interest in certain sectors may provide opportunities amidst the overall slowdown in PE activity.

Private equity (PE) investments in India's real estate sector have witnessed a significant decline in the third quarter of 2023, according to a recent report by Savills India. The sector experienced a 32% year-on-year decrease in PE inflows, highlighting shifting dynamics in the real estate investment landscape.

Key Highlights

• PE investments in Indian real estate dropped to $1.50 billion in July-September 2023, down from $2.20 billion in the same period last year.
• Office assets attracted the largest share of investments, followed closely by data centers and the residential segment.
• Year-to-date PE inflows (January-September 2023) reached $3.90 billion.

Investment Distribution

Historical PE Investments in Indian Real Estate

Analysis

Despite the recent decline, Savills India notes that institutional investments in Indian real estate have remained relatively stable since the peak in 2020. This stability suggests that India continues to be an attractive destination for long-term real estate investments.

The significant interest in office assets, which accounted for the largest share of PE inflows, indicates ongoing confidence in the commercial real estate sector. The substantial investment in data centers (38% of total inflows) also points to the growing importance of digital infrastructure in India's real estate landscape.

While the residential segment received a smaller share of investments, its 20% contribution demonstrates that housing remains a key component of the real estate investment mix.

The projected increase in PE investments for 2024 to $4.30 billion, up from $3.90 billion in 2023, suggests a potential rebound in investor confidence and activity in the coming year.

In conclusion, while the Indian real estate sector has experienced a short-term decline in PE investments, the overall trend indicates resilience and continued investor interest. The diverse allocation across asset classes, particularly the strong showing in office and data center segments, reflects the evolving needs of the Indian economy and the adaptability of the real estate market.