The slowdown in the major economies notwithstanding, institutional inflows into the Indian real estate sector have risen 27 per cent annually to touch $4.6 billion in the first nine months of 2023, with domestic investments showing a surge.
Institutional inflows so far are already 93 per cent of the total inflows recorded last year, data by Colliers showed.
While foreign investments had a dominant 77 per cent share of the total inflows, domestic investments doubled to $1.1 billion. In the year’s third quarter, domestic investments had a significant 63 per cent of the total flows at $800 million.
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While inflows into the office sector saw a sharp decline in the third quarter, the industrial and warehousing sector saw a 3.5 times rise in investments from year ago while inflows into the residential sector rose 2.6 times.
In the third quarter, Inflows into the real estate sector saw a decline of about a fifth from a year ago at around $793 million.
Some of the major deals in the commercial space in Q3 were HDFC Capital Advisor investing $182 million in ‘The House of Abhinandan Lodha’, Qatar Investment Authority investing $150 million in Indospace and Kotak Alternate Asset Managers investing $72 million in Sify Technologies.
Office Dominates
The office sector continued to get a major share of the inflows at $2.9 billion, which was 1.6 times the amount recorded last year.
“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 preleased income-yielding office assets, reflecting a conscious and cautious shift in investor strategies,” said Colliers.
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Globally, private equity funds and alternate asset managers are reducing their exposure to the commercial real estate sector, but in India, their weightage is still relatively high. While the take-up of large office space of 1 lakh square feet and more has somewhat dwindled, there is brisk leasing activity for smaller offices.
The report pointed out that investors were actively forming large joint venture platforms to capitalise on emerging opportunities and participate in existing as well as upcoming projects.
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Investors increasingly see potential in other assets such as warehouses, industrial parks and data centres. Inflow into these assets rose to over $400 million in the third quarter.
Domestic inflows
Domestic investor’s share in total investments rose to 23 per cent this year from 18 per cent the year ago. Most of their funds went into the residential sector.
“This renewed interest in residential assets backed by stable interest rates is expected to drive heightened activity during the upcoming festive season,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.