Private equity (PE) investment in India’s real estate sector took a knock of 17 per cent in 2022 to $5.13 billion as investors turned cautious amid geopolitical and inflationary concerns.

According to a report from Knight Frank India, PE investment in both pure equity and debt form declined in housing, office, and retail segments during this year. However, it increased in warehousing assets compared with last year. PE investments in 2021 stood at $6.2 billion.

The property consultancy firm noted that investors turned cautious because of rising inflation, higher interest rates and geo-political unrest. Among the various sectors, the office segment continued to remain the top draw as it constituted 45 per cent of the total investments.

The warehousing segment came second with a share of 37 per cent. The share of residential and retail in the total pie stood at 12 per cent and 6 per cent, respectively, in 2022.

PE investment in warehousing increased 45 per cent to $1.9 billion this year from $1.3 billion in 2021.

In office assets, it declined 19 per cent to $2.3 billion from $2.8 billion in 2021. Housing segment saw a sharp 50 per cent fall in inflows to $594 million in 2022 from $1.18 billion last year.

The global headwinds are likely to abate by the middle of 2023, the capital investment environment is expected to improve.

“The investment climate in India, moderated in 2022 as investors grew more cautious in response to escalating international tensions and concerns about rising inflation and interest rates,” Knight Frank India chairman and managing director Shishir Baijal said.