Realty sector is passing through ups and downs again after recovering from the Covid-19 pandemic situation as global phenomena have begun to impact realty sector. The ups and downs in realty sector can be gauged by the decline of private equity investments. According to a report from the consultants Frank and Knight, office, residential, retail and warehousing sectors attracted total private equity of US $ 4.2 billion, which is down by 25% compared to investments that these sectors had attracted in 2021 (US $ 5.6 billion). The decline is attributed to increasing inflation, high rate of interests, geo-political instability. The first nine months of 2022, office realty sector occupied the first place by garnering 55% of the investment support, following by Warehousing sector (29%), residential housing sector (9%) and retail sector (7%). Mumbai was successful in attracting 60% of the investments and hence occupied the first place, while Bengaluru ranked second attracting 17% of the private equity investments during the period.
Residential sector
This sector could be able to attract only US $ 370 million investments during the first nine months of the current year, which is down by 63% compared to flow of private equity in the corresponding period last year.
The first nine months of 2021 attracted investments up to US $ 1187 million. During the pandemic situation of 2020, the flow was limited to only US $ 368 million, which is described as an all-time low. Currently, the realty sector is facing the same situation as that of the pandemic situation from the perspective of flow of equity.
Inflation, reduction in rates of interest and because of other reasons the investors are wary of making investments.
Office sector
The office sector continued its momentum in terms of investments. This sector, which is favored by many, has achieved good investments this time as well. It has attracted investments of US $ 2299 million in the first three quarters of this year, which is 15 per cent less than the last year’s equity flow during the corresponding period, US $ 2882 million.
Of the total investments, the share of investments in ready to occupy office properties this year is 67%, while 33% of the investments went to the properties under construction.
Mumbai occupied the first position attracting US $ 6131 million followed by Bangalore which attracted the flow of US $ 4601 million.
Delhi with an investment flow of US $ 3311 million and Hyderabad with a flow of investments of US $ 2081 million occupied the third and fourth positions respectively.
Huge drop of investments in retail
Real estate investments in the retail sector have come down heavily this time. This sector attracted only US $303 million in the first three quarters. This is 63 percent lower than the flow of investments to this sector during the corresponding period last year.
The total flow of investments to this sector was US $ 817 million in the first three quarters of 2021.
This year Ashwin Sheth Group has invested in Viviana Mall while Lake Shore Advisors, the GIC has taken an additional stake in Phoenix Mills. High inflation is said to be the main reason for the decline in investment in the retail sector.
Of the total retail investments, 44 per cent went to new projects, 31 per cent to projects under construction and 13 percent to ready to move properties.
Of all the cities, Mumbai occupied the first place attracting US $ 1664 million, followed by Bengaluru (US $ 512 million), Pune (US $ 483 million), Chandigarh (US $ 267million) and Hyderabad (US $ 197 million).
Warehouse segment
Investments in logistic and industrial sectors are good. Compared to office, residential and retail segments, investors have high confidence in this segment due to the ever-increasing need for last mile delivery and logistics. Investments in the warehousing sector have increased slightly this year.
Investments of US $ 1222 million were recorded in the first nine months. This is 11 percent more than that of the flow of investments US $ 1099 million in the same period last year.
Last year, the total flow of investment to this sector was US $ 313 million. On the whole, it seems that the real sector, which was back on rails after the Covid situation, is facing ups and downs again.
Investments into India increased in 2021 as a result of effective vaccination and government decisions on monetary policy. However, by 2022 it has gone into decline again. Rising inflation, high interest rates and rising global tensions have had a severe impact on investments this year. Investments dropped as investors followed have adopted an approach to tread carefully.
