Although in a Slight Decline, Private Equity Investments in Indian Real Estate Remain Robust in 2022

The inflow of private equity investments into the Indian real estate sector has remained robust, with office buildings leading the way in 2022 in terms of the share of private equity agreements.

Nonetheless, the combination of geopolitical uncertainty, rising interest rates, and inflation risk has slowed the pace of these investments.

Through 29 deals in the office, warehouse, residential, and retail sectors, private equity investments in the real estate industry will reach USD 5.13 billion in 2022.

In 2022, private equity investments declined by 17% compared to the USD 6.20 billion registered in 2021, according to data from Knight Frank India.

Mumbai (41% of total investments), the National Capital Region (NCR), and Bengaluru (14% of total investments) were India's most important real estate markets.

Due to geopolitical worries and rising interest rates, a study finds that investments plummeted 17% from the previous year.

According to Shishir Baijal, CMD of Knight Frank India, the investment climate in India weakened in 2022 as investors became more cautious in response to increased geopolitical tensions and inflation and interest rate concerns.

Despite growing worries of a global economic slowdown and inflationary pressures, private equity investments in Indian real estate assets offered foreign and domestic institutional investors with an enticing investment opportunity.

The office sector remained the favoured asset type throughout the year, accounting for 45 percent of private equity investments, while warehouses accounted for 37 percent. Residential and retail investment accounted for 12% and 6%, respectively, of total investment.Investors are optimistic about the growth of the housing market.

According to Sharad Mittal, CEO of real estate funds at MO Alternates, the Indian property market has remained solid despite increased stock market volatility, inflationary pressures, increasing mortgage rates, and geopolitical worries.

Two years of high housing sales may be attributed to a number of factors, such as affordability and the increased emotional value placed on home ownership. In the near future, it is anticipated that strong fundamentals combined with government initiatives would increase housing demand.

Compared to 2021, when USD 1.3 billion will be spent in the warehouse sector, USD 1.9 billion will be invested in 2022. This reflects a 45 percent increase over the previous year.

As global headwinds are expected to abate by the middle of 2023, the investment environment should improve.

Baijal believes that inflation and the rate of interest rate increases would decline in the majority of nations. As investors concentrate on the economy, government and regulatory environment, company performance, and valuations, India's investment climate should improve.

Private equity exits for the year were $822 million, a decline of 41% from 2021's peak of $1.39 billion.

The average deal size of exits grew much faster than the number of exits, showing stronger valuations and a growing investor desire for deals with more value.