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The private equity (PE) investment in Indian real estate increased by 6 per cent to $2.82 billion during the first nine months (April-December) of Financial Year 2024-25, according to a report by real estate firm ANAROCK. 

"The average deal size saw a notable increase of 32.5 per cent, climbing from $88.5 million in nine months of 2023-24 to $117.3 million in the same period of 2024-25," said Shobhit Agarwal, MD & CEO - ANAROCK Capital. "This jump underscores the impact of large-scale transactions on the market, with the top 10 deals comprising 93 per cent of total PE transactions."

Multi-city deals dominated the transaction table in the first nine of FY25. In terms of cities, Bengaluru and Hyderabad led the transaction tables with 11 per cent and 10 per cent deal shares, respectively.

In the first nine months of FY25, the industrial and logistics sector captured 62 per cent of total investments, significantly surpassing both the office and residential sectors, which attracted 14 per cent and 15 per cent, respectively.

“The fact that the share of private equity investment in the residential sector rose to 15 per cent, up from 12 per cent in the same period last year reflects the increased activity in the housing market,” says Aashiesh Agarwaal of ANAROCK Capital.

However, stronger pre-sales and higher participation from PSU banks in construction finance may reduce the demand for high-cost private equity financing. This may require PE funds to get into earlier stages of project lifecycles to maintain IRRs, or to engage in special situations investments.

While Indian commercial real estate markets saw strong leasing, this segment saw muted PE activity due to geopolitical concerns and high interest rates, which impacted valuations. That said, the sector’s strong operational performance is likely to continue, and an expected decline in interest rates will revive PE investments in the space, the report states.

The industrial and logistics sector remains highly attractive to investors, thanks to strong growth primarily driven by manufacturing, e-commerce, consumer demand, and third-party logistics (3PL).

This growth is further amplified by a shift from Grade-B to Grade-A properties, reflecting a growing focus on quality, large formats, and environmental, social, and governance (ESG) considerations.

Investor interest in warehouses remains strong, supported by a steady supply of investment-grade properties and sustained demand from institutional investors and high-net-worth individuals, the report added.