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Private equity investments witnessed a 4% decline in the first half of FY25, primarily due to reduced investments in the offices sector. The total number of deals also declined from 24 (1H FY24) to 17 (1H FY25). Shobhit Agarwal, MD & CEO – ANAROCK Capital, says, “Private equity investments in offices are primarily driven by foreign investors, which have tapered down due to global factors such as geopolitical tensions and elevated interest rates. However, the aggregate numbers and the dominance of foreign investors in Indian real estate remained largely stable due to the ADIA/KKR investment in the Reliance Retail warehousing assets.”
The average deal size has risen by 23% year-on-year, primarily driven by the Reliance-ADIA/KKR warehousing deal which accounts for 67% of the total investments made in the first half of FY25. Additionally, the number of deals has decreased by 29%, contributing to the increase in the average ticket size.
The top 10 PE deals accounted for 97% of the total value of PE investments in 1H FY25 as compared to 93% in 1H FY24.
In H1 of FY25, the Reliance-ADIA/KKR multi-city deal took the lead. Hyderabad topped the transaction league tables for city-specific deals, attracting investments of USD 284 million during this period. While Hyderabad's share of investments increased, Mumbai's share fell to 9%, down from 23% in the same period last year.
During H1 FY25, pure debt and equity transactions were less prominent and overshadowed by the Reliance – ADIA / KKR deal. As reported, this transaction includes a mix of senior debt, quasi-equity or subordinate debt, and equity infusion.
Domestic and foreign investors upheld the same funding proportions as in the first half of the previous year, reflecting the continued dominance of foreign investors in Indian real estate investments.
H1 FY25 saw the industrial and logistics sector capture 67% of the total investments, significantly surpassing both the office and residential sectors (which attracted 17% each). While private equity investments in the office sector declined by 79%, the industrial and logistics sector saw a substantial 378% increase in investments compared to the same period in the previous financial year.
The share of private equity investment in the residential sector has risen to 17%, up from 8% in the same period last year, reflecting increased activity in this segment. However, stronger pre-sales and higher participation from PSU banks in construction finance are likely to reduce demand for high-cost financing from private equity. PE will need to target earlier stages of project life cycles to maintain the IRRs, or to deploy into special situations investments.
The commercial office sector has long been a favoured choice for private equity investments; however, geopolitical tensions and rising interest rates could significantly impact these investments.
The industrial and logistics sector continues to attract investors thanks to robust growth driven by manufacturing, ecommerce, consumption, and 3PL. This trend is being accentuated by a shift from Grade B properties to Grade A options due to a growing emphasis on quality, large formats, and ESG considerations. The interest in warehouses remains high, with steady supply of investment-grade properties and healthy demand institutional and HNI investors.
