Private equity investors have shifted their focus from office properties to warehouses, which comprised more than 50% of their $3 billion investments in the first half of 2024.
According to a report by Knight Frank on “Trends in Private Equity Investment in India: H1 2024,” private equity investments in Indian real estate totaled $3 billion in the first half of 2024. This represents a 15% increase from $2.6 billion in H1 2023.
Sector Breakdown
Shift in Investor Preferences
Investor preferences have changed, leading to the warehousing sector surpassing the office sector in PE investments. This shift is attributed to the growing e-commerce industry and government initiatives to enhance logistics operations.
PE Investments Across Major Cities
Warehousing Investment Surge
Investment in the warehousing segment reached $1.532 billion in H1 2024, marking a 176% increase from $555 million in H1 2023. Mumbai and Chennai were the primary beneficiaries, attracting $1.5 billion and $32.3 million, respectively. This growth was largely driven by a significant deal worth $1.5 billion, targeting subsectors such as e-commerce, logistics, and 3PL facilities.
Residential Sector Growth
The residential sector garnered $854 million in H1 2024, representing a 209% increase. Investments were distributed across India, with Bengaluru leading at $403 million, followed by Mumbai with $201 million, and Delhi-NCR with $97 million.
Commercial Real Estate Outlook
Shishir Baijal, Chairman & MD of Knight Frank India, stated that India has been a favorable destination for investments due to its economic stability and growth. Although recent economic conditions and higher inflation have caused Western funds to be cautious, the commercial real estate sector in India remains strong. Factors such as the return to work, increasing office occupancy, and rising rental values have contributed to this resilience.
Diversified Investment Approach
In H1 2024, PE investors adopted a diversified approach, making significant investments in early-stage positions. The office sector received $579 million, with 77% directed towards completed projects and 23% towards under-construction developments. However, the office market saw a 67% year-over-year decline in H1 2024. Hyderabad, Bengaluru, and NCR were leading investment destinations, with Hyderabad receiving 45% of total PE investments in the office sector.
Alternative Investment Funds
Registered Alternative Investment Funds (AIFs), regulated by SEBI, have raised around $5.3 billion since January 2021, focusing on residential, commercial, and logistics assets. Between January 2021 and H1 2024, Indian PE investors injected approximately $3.3 billion into the real estate market, with around $2.0 billion of undeployed funds available.
The growth of the residential sector is supported by strong demand and increased involvement from domestic PE investors. Although the office sector experienced a slowdown in H1 2024, the demand for Grade A office spaces in prime locations remains robust.
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By Proptechbuzz
By Ravi Kumar
