·       Office sector continued to dominate at 63% share in total inflows

·       Industrial & warehousing and residential sector witnessed a 3.5X and 2.6X YoY rise, respectively

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.

Top 5 PE investment deals in YTD 2023 –

Source: Colliers

Top 3 PE investment deals in Q3 2023

Source: Colliers

Office sector continues to lead; Residential and Industrial and warehousing see traction

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 commited to office asset class during 2023, industrial & warehousing and residential sectors also saw a significant rebound.

“At a time when major global economies are weighed down by inflation woes, rising cost of capital and growth uncertainty, India’s real estate market stands strong, by navigating through difficult market conditions. The resilience of the market can be gauged in terms of heightened deal activity and amount of capital allocated across diverse asset classes. During the first nine months ended September 2023, overall institutional investments stood strong at USD4.6Bn, a 27% YoY rise, steered by long-term confidence in the region and avenues for diversification. While some volatility and uncertainty will remain in the short-term, the industry is well positioned for a robust 2023 and beyond,” said Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers India.

Investments inflows (USD mn) –

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

YTD refers to the Jan-Sep period of the year

Source: Colliers

City-wise investment inflows in Indian real estate (USD million)

Source: Colliers

Domestic investors gain further ground with 1.7X rise in inflows during Jan-September 2023

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.

Investments in industrial & warehousing sector witnessed 3.5X rise YoY

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.

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The post Institutional investments in real estate rise 27% YoY at USD4.6Bn during Jan-Sep 2023; domestic investments up 1.7X appeared first on Square Feat India.

The office sector has seen a healthy recovery since late last year with occupiers leasing large spaces as now offices are seen as a place for collaboration. Institutional investors are eyeing greenfield and ready office assets with large portfolios, with a view to bundle them up as REITs in the future. Investments into the office sector rose 53% YoY during the first three quarters of 2022.

“The capital in Indian Real Estate is getting more broad-based with active participation also from domestic institutional and retail Investors. Domestic capital is seen to flow across asset acquisitions, with credit in multiple asset classes with varied pooled structures. The sentiment of global investment firms to invest in India remains strong in spite of global slowdown trends. The current state of economics, with respect to inflation and interest rates, is not perceived to have a long-term impact.” said Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India.

Domestic investors have become more active in the market, with their investment inflows accounting for 18% share, compared to 14% share during the same period last year. However, global investors continue to dominate funding activity with higher participation in entity-led deals.

India Investments inflows

Multi-city deals form a chunk of inflows

Multi-city deals continue to be on the rise, with a 45% share in investments during YTD 2022. Majority of the deals were entity-led for office assets as investors lap up investment-grade office portfolio. During January-September 2022, Delhi-NCR saw the highest share of inflows at 21%, followed by Mumbai and Bengaluru.

Platforms deals signalling investor confidence in asset development

The year 2022 has seen several platform deals between institutional investors and developers for specific sectors. Industrial and logistics assets are high on investors’ radar with several platforms being formed for the development of assets in this space.

“With global investors partnering with local developers, there is ample dry powder to be invested in the Indian real estate market, especially in the office, and the industrial sectors. Over the next few quarters, while there may be some slowdown in deployment of funds due to the recession, we believe that the Indian market is relatively well-insulated and investors continue to view it favourably,” Vimal Nadar, Senior Director and Head of Research, Colliers India.

Also Read: Real Estate PE Investments Log 40% Annual Rise in 1H FY23

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