Knight Frank – Trends in Private Equity Investment in India, 2023

Knight Frank's report on private equity investment in India highlights the significant growth in the real estate credit sector, driving growth in both residential and commercial sectors. The report shows that between 2013 and 2023, total credit extended by Indian banks increased by 175% to reach INR 136,752 billion. Housing credit saw a remarkable 324% increase to INR 19,364 billion, while loans for commercial real estate rose by 150% to INR 3,146 billion. Several factors have contributed to this surge in credit. The growth of the Indian economy, rising disposable incomes, and increasing demand for both commercial and residential real estate are the primary reasons. Additionally, the government's focus on infrastructure development and the creation of smart cities has also played a pivotal role in boosting credit to the real estate sector. Government investments in projects such as roads, railways, and airports have driven demand for commercial real estate. Housing policies promoted by the government have made it easier for individuals to access homeownership, further increasing the demand for housing loans. The data from the Reserve Bank of India (RBI) shows that the proportion of residential housing loans in the overall credit extended by Indian banks has increased from 9.2% in 2013 to 14.2% by March 2023. Loans for commercial real estate consistently accounted for 2.3% to 2.9% of the total loans disbursed during this period. The banking system's collective exposure to the real estate sector grew from 11.7% in 2013 to 16.5% in 2023. Importantly, these loans are typically secured, and their compliance with loan-to-value (LTV) ratio regulations has helped keep loan defaults below 2% over the same timeframe.