Institutional Investments In Real Estate Rise 27% YoY
Institutional investments in Indian real estate touched USD4.6 bn during January-September 2023, a 27% YoY increase, highlighting the resilience and attractiveness of the market despite prevailing global challenges. It is worth noting that institutional investment inflows for 2023 have already reached 93% of the total inflows recorded in 2022, despite a clouded global economic environment. While foreign investments continued to lead with 77% share in total investments, domestic investments remained strong and witnessed a two-fold rise YoY at USD1.1Bn. Interestingly, domestic investments led investment activity in Q3 2023, forming 63% of the total investments, abutting the overall investment volume at USD0.8Bn for the quarter. While office assets saw moderation in inflows during the quarter, residential and industrial & warehousing segments witnessed a rebound accounting for about 78% of the total investment volume. India’s sturdy economic growth, and a continued strong positive play of high-performance economic & market indicators are keeping the long-term confidence high amongst global & domestic investors. Investment inflows in the office sector rose 1.6X YoY during Jan-September 2023, at USD2.9 billion, led by select large deals in the sector. This robust performance underscores the sustained confidence of investors in the sector's growth potential and returns. There is an increased investor interest towards completed and / or preleased income yielding office assets, reflecting a conscious & cautious shift in investor strategies. Investors are actively forming large Joint Venture (JV) platforms to capitalize on emerging opportunities and participate in existing as well as upcoming office projects. While investors remain committed to office asset class during 2023, industrial & warehousing and residential sectors also saw a significant rebound. Domestic investors have become more active in the market, contributing 23% of the total investments during this period, compared to an 18% share in the same period in 2022, infusing majority of the funds into residential sector. Nonetheless, foreign investments maintained their lead during Jan-Sep 2023, accounting for a 77% share of total investments with USD3.5 billion inflows. This was a 47% YoY surge compared to same period last year. “The Indian real estate sector continues to demonstrate its allure as a resilient and promising investment destination, with both domestic and international investors showing relentless commitment to participate in its high growth phase. Investment inflows by domestic investors are specifically on the rise and have seen about 70% YoY rise during Jan-Sep 2023. About half of the total investments by domestic investors was directed towards residential assets during the period. This renewed interest in residential assets backed by stable interest rates is expected to drive heightened activity during the upcoming festive season; resonating upbeat confidence amongst investors, developers & homebuyers alike.” said Vimal Nadar, Senior Director and Head of Research, Colliers India. Investment inflows into industrial assets have surged by a stirring 3.5 times, at USD690.6 million during Jan-September 2023. This remarkable growth can be attributed to the sustained expansion of the industrial sector, which has thrived on the surging consumption levels. India's bolstering manufacturing sector has been a prominent driver of this growth, advancing at an impressive pace owing to robust demand and increased industrial output. Key indicators such as Index of Industrial production (IIP) in India increased 5.7% year-on year in July 2023 while India's Manufacturing Purchasing Managers' Index (PMI) rose 4% YoY at 57.5 in September 2023, signalling strong demand conditions and enhanced business sentiments within the manufacturing sector. Upturn in domestic consumption trends, rising demand from 3PL players indicate an attractive investment scenario in the foreseeable future.
Tags : Institutional investments Indian real estate market global challenges global economic environment domestic office assets Vimal Nadar Senior Director and Head of Research Colliers India