Private equity (PE) firms invested $3 billion (around Rs 25,000 crore) in the Indian real estate segment in the first half (January-June) of 2024, recording an increase of 15 per cent from $2.6 billion in the same period of last year, a report said.
Warehousing sector accounted for largest share of 52 per cent of total PE investments during the six-month (H1) period, followed by residential (29 per cent) and office (20 per cent), according to a Knight Frank India report. PE investments in the residential sector also saw a significant increase of over 209 per cent to $854 million in H1 2024 from $277 million a year ago, it said.
The report cited a shift in investor dynamics and sectoral preferences for PE investments into the segment. The office sector, which received the highest share of PE investments since 2018, was surpassed by the warehousing sector, which became the most popular, attracting more investment than the combined total of the office, retail, and residential sectors, it said.
Mumbai dominated the PE investment landscape as the city witnessed a significant increase in PE investment inflows rising from $1,242 million in H1 2023 to $1,701 million in H1 2024. The warehousing sector accounted for 88 per cent of the total PE investments in Mumbai, while the residential sector contributed 12 per cent amounting to $201 million, the report said. Bengaluru received approximately 20 per cent of the total PE investments, totalling $581 million in H1 2024. Around 69 per cent of these investments, amounting to $403 million were dedicated towards the residential sector. The remaining 31 per cent or $178 million were invested in the office sector.
It said investment in the warehousing segment showed a significant upward trajectory in H1 2024, reaching $1532 million, a remarkable 176 per cent increase from the $555 million recorded in H1 2023. Geographically, Mumbai and Chennai were the primary beneficiaries, attracting $1,500 million and $32.3 million respectively in the warehousing sector.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “India has been favourably viewed for investments, especially in the last decade, due to economic stability and growth. However, recent economic conditions and higher inflation have led funds from western economies to adopt a wait-and-see stance. However, Indian commercial real estate continues to thrive due to factors like return to work, rising office absorption and strengthening rental values.”
Similarly, a year on year strengthening of residential market and continued consumer activities in retail further bolstered by economic growth has incentivised funds to adopt a long-term perspective towards investment in real estate, it said. “Looking ahead, we expect some easing of conditions in the western world which will bring back the investments from global players. This, combined with India’s growth trends, is expected to lead to increased investment activity from global funds,” Baijal added.