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Indian Real Estate – Investors’ Hot Favourite

Vinod Behl(Editor at Torbit Realty) - April 16, 2023 - - 0 |
Investors' Hot Favourite

Notwithstanding global headwinds, Indian realty continues to be the cynosure of both domestic and global investors. with office sector attracting highest investments at USD 0.9 billion in the first quarter of CY 2023 and investments in residential assets  soaring 22 X YoY at USD 361. 1 million.

According to  a recent report by Colliers International, Institutional investments in real estate remained strong during Q1 2023 at USD1.7 billion, led by office sector, lending an optimistic outlook for the year.  The office sector continued to drive the investment inflows accounting for 55% of the total inflows during the quarter, followed by residential sector at 22% share. Investment inflows in office sector rose by 41% YoY at USD0.9Bn, led by select large deals. Owing to the strong growth prospects in office sector, key institutional investors are entering into strategic partnerships to strengthen their presence and expand their office portfolio in India.

Investments from domestic investors rose 4X YoY during the quarter. Domestic investors remained committed towards residential assets during the quarter, despite higher lending rates. On the other hand, global investors remained inclined towards office and industrial assets, and dominated the total investment inflows at 76% share. Larger markets such as Delhi-NCR and Bengaluru attracted 1/3rd of the total investments during the quarter, led by increased activity in these markets. However, majority of the inflows (63%) were through multi-city deals.

City wise investment inflows (USD million)

City Q1 2022 Q1 2023 YoY Change Share Q1 2023 (%)
Bengaluru 16.7 196.6 1077% 12%
Chennai 39.8  – -100% 0%
Delhi NCR 130.9 380.9 191% 23%
Hyderabad  –  – 0%
Mumbai 286.1 40.8 -86% 2%
Pune  –  – 0%
Others/ Multi-City 740.6 1040.0 40% 63%
Total 1214.1 1658.3 37% 100%

Note: The data has been compiled as per available information in the public domain

The institutional ow of funds includes investments by family oces, foreign corporate groups, foreign banks, proprietary books, pension funds, private equity, real estate fund-cum-developers, foreign-funded NBFCs and sovereign wealth funds.

According to Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers India, Indian real estate investment cycle is now transitioning into a phase to witness secondary market transactions and may see more institutional owners partially or fully divesting portfolios. In the coming quarters,  some large quality assets are likely to be  traded in office and select logistics assets. The preference of India in developing Asia Pacific markets is getting stronger.

Investments inflows –

Asset Class Investments Q1 2022 (in USD mn) Investments Q1 2023 (in USD mn) % Change
Office 643.6 907.6 41%
Retail 257.0 -100%
Alternate assets* 39.8 158.2 298%
Mixed-use 77.3 15.1 -80%
Industrial & Warehousing 179.9 216.3 20%
Residential 16.5 361.1 2087%
Total 1,214.1 1658.3 37%

Source: Colliers

*Note: Alternate assets include data centers, life sciences, senior housing, holiday homes, student housing, etc.

Investment inflows in industrial assets witnessed a 20% YoY rise during Q1 2023 at USD216.3 mn, led by foreign investments. Industrial sector is witnessing consistent growth owing to increased opportunities in manufacturing, favourable government policies and growth in E-commerce, leading to a significant amount of investible assets in the region.  Along with core assets, investors also continued to allocate funds towards alternative assets and infused USD158.2 mn, 4X more than same period last year. . This portfolio diversification has enhanced the ability of many funds to grow their portfolios and remain resilient in these uncertain market conditions.

Global institutional investors’ appetite for office assets remains strong owing to India’s growing  talent pool, digitization , enhanced transparency in deal structures and stable returns , according to Vimal Nadar, Senior Director  & Head Research, Colliers India . Foreign investments accounted for about 93% of the total investments in office assets during Q1 2023. Led by increased opportunity, we are likely to see  more collaborations to develop platforms for developing high quality Grade A office assets.

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