Indian Real Estate PE Investments Surge by 32.5% in FY25 Amid Fewer Deals
The Indian real estate private equity (PE) landscape has witnessed an intriguing trend in FY25, where the total investment value has seen a substantial uptick, even though the number of deals has dwindled. According to a survey conducted by Anarock Capital, while the number of PE deals in the first nine months of FY25 dropped from 30 in 9M FY24 to 24 in FY25, the total value of these deals increased by 32.5%, reaching an impressive $2.82 billion. This surge in investment, despite fewer transactions, highlights a significant shift in the focus of private equity investors towards high-value deals, with large-scale transactions dominating the market.
The notable driver behind this increase is the landmark $1.54 billion warehousing deal between Reliance, ADIA, and KKR. This deal, along with another major deal by Blackstone and LOGOS worth $204 million, helped push the industrial and logistics sector to the forefront of private equity investment. These two deals alone accounted for a significant portion of the total investment, with the logistics and warehousing sectors capturing a remarkable 62% of the total PE activity during this period. According to Shobhit Agarwal, this trend underlines the growing importance of logistics infrastructure in India’s rapidly expanding economy, as companies continue to invest in robust supply chains driven by e-commerce, manufacturing, and third-party logistics.
Interestingly, hybrid deals — which combine both debt and equity — became the dominant transaction structure, making up 55% of the total PE activity in the period. This preference for hybrid transactions reflects the current market dynamics, where investors are seeking a balance between equity and debt to manage risk amid economic uncertainty. Traditional debt and equity deals have become relatively scarce, as high interest rates and geopolitical factors have led to caution among investors. However, with the industrial and logistics sectors thriving, there remains a strong appetite for investment in this space, even amidst challenges.
A closer look at the geographic distribution of these deals reveals that multi-city transactions are on the rise. The Reliance-ADIA/KKR deal, along with two other multi-city deals, drove the share of such transactions to more than 62%. Bengaluru and Hyderabad emerged as the key cities for these deals, capturing 11% and 10% of the deal share, respectively. Despite this, the office and residential sectors still account for a smaller proportion of the PE pie, with these sectors capturing 14% and 15% of total investments, respectively. The relatively muted activity in the commercial real estate sector can be attributed to concerns over geopolitical risks and high interest rates, which have negatively impacted valuations.
From a sustainability perspective, the growing interest in industrial and logistics properties is noteworthy. The sector’s strong performance is closely linked to several key drivers, including the booming e-commerce industry and increasing consumer demand. Furthermore, the shift from Grade-B to Grade-A properties signifies a growing emphasis on sustainability and environmental considerations. Investors are keen on properties that not only offer operational efficiency but also adhere to environmental, social, and governance (ESG) standards. This trend aligns with India’s broader goals of promoting sustainable development, as businesses increasingly prioritise sustainability in their operations and investments.
Overall, while the Indian real estate PE market has seen a reduction in the number of deals, the sharp increase in investment size, particularly in the logistics sector, demonstrates investor confidence in India’s long-term growth potential. As interest rates stabilise and geopolitical concerns ease, it is expected that this growth trajectory will continue, driven by both domestic and foreign investments. The industrial sector, with its strong fundamentals and focus on sustainable, high-quality assets, will remain a key area for investment in the coming years.
