As the real estate sector is witnessing a recovery from the impact of the coronavirus pandemic, institutional investments in Indian real estate witnessed a 14 per cent year-on-year jump to $2.6 billion during January-June 2022. The inflow was led by the office sector, which accounted for about 48 per cent share, followed by the retail sector with a share of 19 per cent, according to a report by Colliers India.
On a quarterly basis, inflows during April-June 2022 increased as compared to the preceding quarter, while registering a 50 per cent jump from the average quarterly inflows of 2021.
“The first half of 2022 has witnessed euphoria of businesses bouncing back with increased office and industrial leasing, retail and travel spend, and continued buoyancy in the residential sector. However, the market is seeing some caution on account of geopolitical tensions and increased expected risk-adjusted returns. Investments in India continue to increase in both development and operating assets,” said Piyush Gupta, managing director (capital markets and investment services) of Colliers India.
He added that with the current business environment, India will benefit the most from the Asian economies with increased capital inflows. The Indian realty is likely to witness both equity and credit inflows tapped by existing and newer investment management platforms.
Domestic investors are back in the market with a 38 per cent share in H1 2022, a massive jump from just 13 per cent share in H1 2021. Domestic investors were majorly inclined towards mixed-use assets and the retail sector. However, investments continue to be driven by foreign investors wherein pension and sovereign funds are betting on income-yielding assets in the office, retail and industrial sectors, the report said.
Investments In Office Sector
During the first half of 2022, the office sector garnered about 48 per cent of the total investments. Investors are seeing encouraging signs of revival in the office sector since late last year, Colliers India said.
It added that while a hybrid style of work is the dominant mode of working, large technology corporates continue to lap up office spaces. Investors are taking a medium-to-long term view of the sector, with the intention of bunding assets into REITs. As a result, investments in the office sector rose 20 per cent y-o-y in H1 2022.
During H1 2022, the retail sector saw a 19 per cent share in investments as investors look toward completed malls as an investment avenue. India’s retail market is seeing an expansion of fashion and F&B (food and beverages) brands. Also, malls have been seeing a healthy pick-up in footfalls since last year. The industrial & logistics sector and the residential sector saw subdued inflows during H1 2022.
Investments inflows into alternative assets rose 53 per cent y-o-y during H1 2022 to about $370 million, indicating that investors are betting big on diversifying their portfolios. Deals during this period ranged from data centers, holiday homes and life sciences.
Vimal Nadar, senior director and head (research) at Colliers India, said, “A recession in the global markets will have some bearing on India. On the positive side, we see this boosting IT services in India. We can expect more investments in global capability centers in India over the next few years.”
He added that there is untapped potential in India’s alternative assets which investors are looking for from a diversification perspective. “During H1 2022, inflows in alternate assets accounted for 14 per cent of total investments. The next few quarters will see some greenfield investments, especially in the office and industrial & logistics sector.”
Region-Wise Investment Inflows
Delhi-NCR saw the highest share of inflows at 35 per cent, followed by Mumbai with an 11 per cent share and Chennai with a 10 per cent share. However, multi-city deals continue to be on the rise, with a 43 per cent in investments during H1 2022. These deals were entity-led for assets across multiple cities.
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