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Indian Real Estate Sector on a High! Private Equity Investments Hit $2.82 Billion in FY25

The real estate sector in India saw a 6% rise in PE investment to $2.82 billion in FY25. Industrial and logistics sectors lead, showing strong growth and investment opportunities.

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Real Estate Sector

India's real estate sector attracted investment of $11.4 billion in 2024: Report Photograph: (IANS)

Real Estate Sector: The private equity (PE) investment in India’s real estate sector has shown impressive growth, increasing by 6% to reach $2.82 billion during the first nine months (April-December) of the financial year 2024-25, according to a report by real estate firm ANAROCK. This surge highlights the ongoing attractiveness of India’s real estate market to global investors.

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Growth in Deal Size and Transaction Volume in India’s Real Estate Sector

The first nine months of FY25 witnessed a substantial increase in the average deal size, which rose by 32.5%. It went from $88.5 million in the same period of the previous financial year to $117.3 million. This growth reflects the significant impact of large-scale transactions. In fact, the top 10 deals alone accounted for 93% of the total PE transactions in the real estate sector. The dominance of multi-city deals has also been a notable trend, with cities like Bengaluru and Hyderabad leading the charge, contributing 11% and 10% of the total deals, respectively.

Industrial and Logistics Sectors Lead the Investment Race

The industrial and logistics sectors have attracted the lion’s share of PE investments, accounting for 62% of the total investments in the first nine months of FY25. This significant investment is largely driven by the growing demand in manufacturing, e-commerce, and third-party logistics (3PL). These sectors are performing strongly due to consistent growth in consumer demand and a shift towards Grade-A properties, focusing on high-quality, large-scale formats, and environmental, social, and governance (ESG) standards.

In comparison, the residential sector received 15% of the PE investments, up from 12% in the same period last year. This growth in residential investment indicates increased activity in the housing market, further supported by stronger pre-sales and the rising involvement of PSU banks in construction finance.

Challenges and Opportunities for Private Equity Investors

Despite the overall positive outlook, the real estate sector faces some challenges. High interest rates and geopolitical concerns have slowed down PE activity in the commercial real estate market. However, the sector's strong operational performance is expected to continue, and a potential decline in interest rates could revitalize PE investments in the coming months.

With a sustained demand for investment-grade properties, particularly in the warehouse segment, investor interest remains high. High-net-worth individuals and institutional investors continue to see strong growth potential in the industrial and logistics sectors, making this area a key focus for future investments.

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