India's real estate sector is witnessing a notable shift in investment trends. According to Knight Frank, private equity (PE) investments in real estate surged by 15% in the first half of 2024, reaching nearly USD 3 billion (INR 23,400 crore). Residential properties have seen a significant increase in investment, totaling USD 854 million (INR 6,650 crore), compared to USD 277 million (INR 2,150 crore) in H1 2023. Despite this shift, commercial real estate, particularly office space, remains robust with USD 579 million (INR 4,500 crore) in PE investments. Analysts predict that total PE investments could exceed the 2021 high of USD 6.2 billion (INR 48,600 crore) by year-end. Alternative Investment Funds (AIFs) also play a growing role, with USD 2 billion (INR 15,600 crore) still available for investment. Challenges such as high global interest rates may impact future investments, but overall, the market shows strong recovery signs and a shift towards residential assets.
India's real estate market is seeing a shift in investor preferences, with residential properties gaining traction in the first half of 2024. A report by Knight Frank reveals a 15% increase in private equity (PE) investments in real estate compared to the same period last year, reaching nearly USD 3 billion (approximately INR 23,400 crore).
Traditionally, commercial real estate, particularly office space, has attracted the most PE investment in India. However, this year shows a change. Residential real estate has taken the lead with USD 854 million (approximately INR 6,650 crore) invested, significantly higher than the USD 277 million (approximately INR 2,150 crore) in the first half of 2023. This represents a major shift in investor focus.
While residential is surging, the office sector remains healthy with USD 579 million (approximately INR 4,500 crore) in PE investments. This is likely due to the ongoing low availability of Grade-A office space, a highly sought-after commodity for businesses. Experts predict continued interest in office space, with a possibility of high-profile deals happening later this year.
The strong start to 2024 suggests that PE investments in Indian real estate could surpass the USD 6.2 billion (approximately INR 48,600 crore) recorded in 2021. Market analysts anticipate an increase in deal activity towards the end of the year as investors finalise valuations. If these predictions hold true, it would mark a significant turnaround from the USD 3.2 billion (approximately INR 25,000 crore) recorded in 2023.
The report also highlights the growing role of Alternative Investment Funds (AIFs) in the Indian real estate market. These funds have raised a substantial amount of capital, with approximately USD 2 billion (approximately INR 15,600 crore) still available for future investments. This indicates a continued flow of funds into the real estate sector.
While the outlook is positive, there are some challenges to consider. Global interest rates remain high, potentially increasing the cost of capital and delaying some investment decisions. However, recent dovish signals from central banks like the US Federal Reserve suggest that capital costs could decrease in 2025. Overall, the Indian real estate market is showing signs of a strong recovery, with a shift in investor focus towards residential properties and continued interest from alternative funding sources.