India drives $3.4b Private Equity real estate investments in 2022

V Nagarajan

Private Equity (PE) investment inflows into the Indian real estate sector stood at $3.4 billion (INR 271 billion) at the end of 2022. This is at par with the investment quantum registered in 2021, according to the latest data by Savills India, a global property consulting firm.

Data suggests that commercial office assets remained the frontrunner during 2022, garnering about half (45 per cent) of the investment pie. Residential and retail sectors also witnessed robust growth, riding high on the end-user’s demand. This year marked the largest acquisition of an operational retail asset in India in the last 5 years and also one of the lowest residential inventory overhangs in over a decade.

Persisting geopolitical challenges amid the ongoing Russia-Ukraine war, high global inflation, a fresh COVID outbreak and lockdown in China have slowed down the post-pandemic economic recovery across the globe. However, despite these global economic pressures PE investments in Indian real estate assets provided favourable avenues for both global and domestic institutional investors.

Savills India expects $3.5 billion – $4.0 billion of private equity investments in real estate in 2023. The manufacturing sector growth and digitisation of the economy is likely to drive investments in industrial and warehousing, data centres and life sciences segments. Savills India estimates that India has the potential to create a demand of around 10 million sq. ft. every year for life sciences R&D lab spaces, till 2030. This could provide institutional investors with ample opportunity to increase allocations to the sector, especially in the development space.

“Commercial office remains the preferred investment product in India which absorbs around a third of the total APAC office demand by space. With the increase of office REITs, this trend will grow as domestic investor participation increases. Data centres have been the second most visible investment product in 2022. India remains a favourable destination for global real estate investors despite the global events and we will witness newer offshore capital enter India in 2023,” said Diwakar Rana, Managing Director, Capital Markets, Savills India.

According to Anarock survey, PE investments in real estate are up 29 per cent to $1.8 billion due to improved sales and overall market sentiments.

This can be mainly attributed to a recovery in real estate PE investments because of widespread vaccine coverage, lifting of lockdown restrictions and improved market sentiments in Q1of FY23, according to Anarock survey.

Top five deals remained the major driver of PE investments within the real estate sector. They accounted for 90 per cent of the total value of PE investments in Q1 of FY23. There is a 53 per cent increase in average ticket size in Q1 FY23 as compared to Q1 FY22. This is largely due to the investor focus on multi-city deals.

Unlike Q1 FY22, deal activity focus in Q1 of FY23 shifted back to multi-city deals, from single-city deals. NCR has gained significant attention from PE investors with the highest city-wise inflow at 48 per cent in Q1 FY23, as compared to only 1 per cent in Q1 ofFY22.

Equity contribution slightly increased to 87 per cent (Q1 FY23) from 84 per cent (Q1 FY22) of the total PE investments in Indian real estate.

In Q1 of FY23, deployment by JV platforms have increased significantly in the commercial sector at 74 per cent, especially in Grade A office space, indicating a high investor interest. The industrial and logistics sector is showing greater potential.

In Pune, a commercial unit was gifted to me.  Can I sell and repatriate the sale proceeds to Gulf?  Prakash Jain, Dubai.

The sale proceeds of commercial unit acquired by way of gift should be credited to NRO account only.  From the balance in the NRO account, you can remit upto USD one million, per financial year, subject to the satisfaction of authorised dealer and payment of applicable taxes.

We are two brothers who have inherited a family property in India.   My brother has relinquished his interest in the property.  How do I legalise this transfer?   Dharmani, Dubai.

In order to legalise the relinquishment, your brother will have to execute a release deed or a settlement deed in your favour.  

The legal document is of course subject to stamp duty and registration charges.  

You can also apply for a legal heir certificate and the tehsildar, after conducting an enquiry will issue a certificate mentioning the names of legal heirs who succeeded to the estate.  

With your brother’s release deed and legal heir certificate, you are in a legally sound position to either retain or sell the property at any stage.