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2023 PE investments in Indian real estate up 14% YoY at $3.9 bn: Savills India

January 12, 2024: Private equity investments inflows into the Indian real estate sector stood at USD 3.9 billion (INR 323 billion) at the end of 2023, registering a 14% increase YoY. Foreign institutional investors retained their status as the primary contributors to investment activity, holding a 75% share, according to the latest data by Savills India, a global property consulting firm.

Source: RCA and Savills India Research

Data suggests that commercial offices retained their leading position, with the resilience of investible grade office assets reinforcing this dominance. Residential and industrial sectors also witnessed robust growth; the former riding high on end-user demand. In terms of segments, office assets took the lead with a 65% share in the total PE investments, followed by residential at 15%, and industrial & warehousing at 10%. Mumbai received the largest proportion of commercial office investments.

Despite geopolitical challenges, high global inflation and economic recessionary concerns, private equity investments maintained the momentum, offering favourable opportunities for both global and domestic institutional investors.

Source: Savills India Research

Savills India expects USD 3.5 billion – USD 4.0 billion of private equity investments in real estate in 2024. Amidst limited investible grade assets, the office segment might see muted investments, while alternative sectors like life sciences, data centres and student housing are poised for prominence. The investor base is anticipated to broaden, especially from Asian institutional investors. In 2023, Japanese investors notably intensified their commitments in real estate, from direct purchases to forming joint ventures.

“Despite the global geopolitical and economic turmoils in the post-pandemic world, India has established itself as the strongest destination in emerging markets for real estate investors. This is a result of the inherent strength of India’s demographics and economic potential, boosted by a slew of progressive regulatory changes across sectors, especially in real estate, as witnessed in record residential sales and office leasing. The sideways movement of transaction volumes over the last few years, despite very strong investor demand, is mainly due to the nuances and time gaps in investment stock development in an asset creation economy. The coming years will see India claiming its share of global real estate capital allocation, where it is currently under-represented.” said Diwakar Rana, Managing Director, Capital Markets, Savills India.