Promising Prospects Despite Disruptions 

Despite the dip in the institutional investment in the first half of 2022, the growing interest of foreign investors in Indian real estate with rise in multi-city deals and increase in average deal size, due to transformative reforms  , is really an encouraging sign. Commercial real estate segment is the major driver of foreign investment and NCR has emerged as a favourite destination for foreign investors, bagging almost one fifth of the overall investment. 

According to a report by Vestian,  institutional investment during H1 2022 was recorded at USD 2.3 billion as opposed to USD 3.2 billion of investment observed in H1 2021, depicting a decline of 28% when compared to the amount in H1 2021.Repeated waves of the pandemic, coupled with increasing inflation and the uncertainty caused by global headwinds, created a greater impact on the Indian market, thus leading to a cautious approach adopted by investors in Indian real estate market. 

Interestingly, despite the significantly reduced amount of investment in the sector, the average deal size in H1 2022 was recorded at USD 118 million, depicting an increase of 14% when compared to the average deal size in H1 2021 Foreign funds accounted for a lion’s share of 84% in H1 2022, signifying the increased interest of foreign investors owing to ease of doing business and various other reformatory changes in the country in recent times. 

Multi-city deals occupied the top rank in institutional investment, with its share increasing to 36% in H1 2022 from 30% in H1 2021. On individual cities basis, NCR accounted for the maximum amount of real estate investment in H2 2022, attracting 21% share of the total investment. 

The commercial assets segment remained the most preferred segment to attract investor interest, accounting for the maximum amount of real estate investment, to the tune of 62% share of the total investment in H1 2022. The increased investment in commercial sector can largely be attributed to brisk return-to-office momentum, growing number of start-ups leading to a stronger workforce, and a fair pick-up in the retail sector in H1 2022. ; 

Tracking the investment trend on quarterly basis, institutional investment in the second quarter of 2022 was recorded USD 1.3 billion, depicting a 9% decline when compared with the amount of investment in the year-ago period of Q2 2021, attributable primarily to the economy slowing down in the country and the global headwinds from geopolitical conditions creating an uncertain environment.Like  the half yearly trend, majority of the investment during Q2 2022, to the tune of 86%, came from foreign funds, while domestic investors’ share was restrained to 14%.Investments in the commercial assets segment led the way in Q2 2022 with a significant share of 61%, followed by investment in residential sector that rose substantially to 20% in Q2 2022 from 14% in Q2 2021.Interest in life sciences augmented prominently in Q2 2022, leading to the share of alternative segments accounting for 15% out of the total investment during the period.Multi-city deals topped the chart in Q2 2022, with a share of 45% out of the total investment, while on individual cities basis, NCR accounted for majority share of 27% in the total investment in Q2 2022.