Institutional investments in Indian realty touches $1 bn in Q1 2024: Report

April 2, 2024: Institutional investments in the Indian real estate sector touched $1 billion in the first quarter of 2024 (Q1 2024), signalling a steady and positive start to the year, according to a report by Colliers India. While this was a 40% drop compared to the same period last year, India’s real estate investments showed improvement on a sequential basis registering 21% QoQ rise. Foreign investments retained their dominance, forming 55% of the total inflows during the quarter. Domestic investments too witnessed a notable rise at 15% YoY in Q1 2024. The share of domestic inflows in overall institutional investments continued to rise to 45% in Q1 2024, compared to 24% in Q1 2023. Apart from the core asset classes such as office, institutional investments in industrial and warehousing and residential segments were noteworthy in the first quarter. The segments received capital inflows to the tune of $0.2 billion and $0.1 billion respectively in Q1 2024, forming a combined 28% of the total investments.

Piyush Gupta, managing director, capital markets and investment services at Colliers India, said, “At $1 billion, institutional investments into Indian real estate have started on a steady positive note. Interestingly, domestic investors are increasingly gaining more ground in Indian real estate. It is evident in the whopping 45% share in Q1 2024 investments, a marked surge from prior years. Within domestic institutional investments, office and residential assets formed about 66%, reflecting a strategic approach to align with India’s growth trends. This also underscores growing confidence of a diversified spectrum of investors across multiple investment strategies including credit and acquisitions.”

At $0.6 billion, the office sector accounted for 57% of the total investment inflows during Q1 2024. Foreign investments remained predominant, driving over two-thirds of the sector’s inflows, reinforcing the confidence of global funds in the fundamentals of commercial office real estate in India. Institutional investors continued their preference for completed and pre-leased income-yielding office assets as compared to greenfield developments. With a collective 81% share, Bangalore and Hyderabad were the leading markets for office investments, mirroring the robust office demand seen in these cities this quarter. Bangalore and Hyderabad emerged as frontrunners for demand of Grade A office space in Q1 2024, cumulatively accounting for more than half of the India leasing activity. Overall office demand across the top six cities also remained robust, at 13.6 million square foot (msf), marking a remarkable 35% increase compared to the same period last year.

Following a remarkable surge in investments in industrial and warehousing assets in 2023, the segment maintained its momentum, capturing an 18% share of total inflows in Q1 2024. A steady investment inflow of $0.2 billion during the quarter, similar to the same period previous year, indicated sustained growth in the particular segment. As the segment evolves, and micro-fulfillment centres, dark stores and AI-driven supply chains become more prevalent, consolidation and institutionalisation will pick up pace, further driving global capital in the coming years.

Vimal Nadar, senior director and head of research, Colliers India, said, “With the IMF’s projected GDP growth rate of 5.7% in 2024, India continues to garner significant investor interest within the APAC region. In Q1 2024, the APAC region contributed to over 82% of foreign inflows in India’s real estate sector, with investments predominantly focused on office assets followed by the industrial and warehousing segment. The surge in investments by APAC countries such as Singapore can be attributed to a combination of factors including favourable investment climate, strong demand fundamentals across core and non-core segments within real estate, and strategic alliances in the form joint venture platforms. Amid evolving global capital trends, India’s real estate market promises significant growth potential and will continue to attract global capital from diverse regions.”

In Q1 2024, Hyderabad and Pune collectively attracted over 50% of the investment inflows in India, notably drawing substantial capital into office spaces and industrial and warehousing assets. These cities, alongside Bangalore, solidified their positions as prime destinations for office sector investments. At the same time, investments in Industrial and warehousing assets were concentrated in Pune, Chennai and Delhi-NCR, indicating robust industrial activity in these cities.