Indian Real Estate Sees 43% Drop In Private Equity Inflows Over Five Years: Anarock Capital

Private equity investments in Indian real estate dipped 3% year-on-year to $3.7 billion in fiscal 2024-25, down from $3.8 billion the previous year, according to data released by Anarock Capital on Monday.

The decline marks a continuing trend, with PE inflows falling steadily from $6.4 billion in fiscal 2020-21—a 43% drop over five years—largely due to reduced foreign investor activity amid global economic and geopolitical uncertainties.

"PE investments have steadily declined over the past five years, primarily driven by reduced foreign investor activity amid heightened global macroeconomic uncertainty and geopolitical volatility," said Shobhit Agarwal, MD & CEO, Anarock Capital.

Foreign investors accounted for 84% of total inflows in fiscal 2024-25, while domestic players contributed just 16%.

Among asset classes, office segment investments saw a sharp decline, plunging to $806 million in fiscal 2024-25 from $2.2 billion in fiscal 2023-24. Anarock noted that while leasing activity remains strong, high interest rates and geopolitical stress have made investors more cautious.

On the other hand, investments in warehousing assets surged, helping offset the decline in housing and office segments.

The last fiscal year saw a significant deviation in funding structure, with hybrid deals surging to 42% of total PE inflow. Equity and debt investments dropped to 37% and 21%, respectively.

"A marginal 3% dip in PE inflows is more a sign of market recalibration than concern. Investors are becoming more selective, focusing on quality assets and structured opportunities that promise long-term value over short-term gains," Binitha Dalal, founder and managing partner, Mt K Kapital, commented on the report.

The shift also reflects a more mature investment approach, especially in segments like warehousing, commercial, and income-generating residential assets, she added.

"Despite global headwinds, India's real estate sector continues to hold strong, and we can expect steady, strategic capital deployment going forward," Dalal said.

Ankur Jalan, CEO of Golden Growth Fund, an alternative investment fund, said the PE inflows remained flat last fiscal despite global uncertainties.

"India's growth momentum and rising affluence have given momentum to real estate activity, thereby evincing interest from investors," he said.

(With inputs from PTI)