Mumbai: Private equity investments in Indian real estate are expected to decline by 19% Year-on-Year during the ongoing calendar year of 2022.
As per an analysis done by Knight Frank, an international property consultant specialing in residential, commercial, capital transactions, research, and valuations, among others, in its latest report - Investments in Real Estate: Trend in private equity investments in India (9M 2022) presented the outlook for the current year.
According to their analysis, as stated in the report, "We projected the overall private equity investments in India at $6.9 billion in 2022, based on the correlation of government investment, currency movement, inflation, interest rate, and office supply to private equity investments in India.
"However, with overshooting of underlying variables of inflation, exchange rate, and interest rate owing to the evolving geopolitical scenario brought by prolonged Russia – Ukraine war and strong monetary policy actions in the developed markets, we have revised our earlier projection downward."
Now, the total private equity investments in India are expected to be at $5 billion in 2022, as per the revision done by Knight Frank.
Between January to September this year, there has been a sharp fall in private equity investments by 25% to $4.2 billion as compared to $5.6 billion received during the same period in 2021.
This downward revision gets correlated with the International Monetary Fund's (IMF's) announcement earlier this week, of sharply lowering India's economic growth forecast to 6.8% from the earlier 7.4%. The weaker than expected growth forecast is due to similar factors that Knight Frank has referred to.
IMF's report pointed out that more energy and food price shocks are likely to cause inflation to persist for a longer duration, while the global tightening situation in financing conditions could trigger widespread debt distress in emerging markets.
In India, the investment situation has improved in 2021, due to fiscal and monetary support by the government, but during the first nine months of the ongoing calendar year, investors are more cautious. In fact, there already have been fewer transactions in 2022 due to the cautious approach adopted by global investors.
"Also domestic financial institutions are wary of lending to the real estate sector in India," a property research expert said to the Free Press Journal.
Up to September 2022, the office sector accounted for 55% of all private equity investments, followed by warehousing (29%), residential (9%), and retail (7%). Mumbai received the highest investments across sectors accounting for 60% of the total investments so far in 2022, followed by Bengaluru with 17% of the total investment pie.
