Private equity investments in India's real estate sector were little changed in the year through March 2023 compared with the year before, but local and foreign investors struck several large platform deals, a new report shows.
According to real estate consultancy firm ANAROCK Capital’s Flux report, PE investments in the real estate sector remained at $4.2 billion in 2022-23, the same level as the preceding fiscal year. This was, however, far lower than the $7.2 billion that the sector recorded in FY21.
The report also showed that the average ticket size during the year declined to $72 million from $86 million in the previous year. Commercial office and residential segments received the largest share of investments, comprising 40% and 29% of the total funding, respectively.
The highlight last fiscal year was the number of large deals where foreign or local companies formed investment platforms to build offices, warehouses or even residential properties.
The year saw real estate platform deals valued at $4.5 billion, the report showed. These included Canadian pension fund CDPQ's real estate arm Ivanhoe Cambridge teaming up with Singapore-based Mapletree to launch a platform to develop, own and operate technology-sector-focused workplaces in India. The partnership has an investment capacity of about $1.9 billion.
Separately, Ivanhoe teamed up with PE firm Bain Capital and Indian Lodha Group to develop industrial and logistics properties. Canada Pension Plan Investment Board and Singapore sovereign wealth fund GIC were among the other foreign investors that sealed platform deals.
“Commercial real estate and industrial and logistics attracted pan-India platforms with larger deal values of over $500 million, while the residential sector attracted smaller-ticket platform deals of between $50 million and $125 million, and these were largely regional in nature,” said Shobhit Agarwal, the managing director and chief executive at ANAROCK.
Of the total PE flows into the sector, foreign investors' share declined in the total pie. Foreign players participated in about 81% of the total real estate PE deals in FY22, but their contribution reduced to about 75% last fiscal year, the report showed. It also pointed out that foreign investors have seen their incremental investments decline by 7% to $3.2 billion in FY23 from $3.4 billion in FY22. This signals greater activity by domestic PE players in the real estate sector.
The top 10 PE deals closed during the year accounted for 69% of the total investments made in the sector, up from 67% in FY22.
The largest deals included Brookfield Asset Management’s 51% stake buy in Bharti Enterprises’s four commercial properties including Worldmark Aerocity (Delhi), Worldmark 65 and Airtel Center (Gurugram) and Pavillion Mall (Ludhiana), for an enterprise value of about $660 million. Singapore’s GIC bought a stake worth $353 billion in Bengaluru developer Bharatiya City Developers’ commercial assets.
As for the mode of investment, PE players preferred equity funding over debt deals, even as the share of the latter increased to 33% from 20% from FY22, the report noted.
