Institutional Investment in Indian Real Estate Soars, Led by Housing and Industrial Sectors

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    Institutional investments in the housing segment in India have witnessed an impressive surge, nearly quintupling to reach USD 433.4 million in the first half of this year, according to a recent report by Colliers India. Simultaneously, inflows into industrial and warehousing assets increased by 95 percent, totaling USD 350.2 million. Comparatively, during the same period last year, the housing segment saw an inflow of USD 89.4 million, while industrial and warehousing assets received USD 179.8 million.

    The substantial increase in institutional investments encompasses various sources such as family offices, foreign corporate groups, foreign banks, proprietary books, pension funds, private equity, real estate fund-cum-developers, foreign-funded NBFCs, and sovereign wealth funds.

    The remarkable growth in investment inflows within the residential sector has been predominantly driven by domestic investments. This surge can be attributed to improved housing demand, stable interest rates, and favorable affordability levels, as per the report.

    Colliers further stated that industrial assets witnessed a doubling in investment inflows, propelled by the sustained growth of the sector and increasing consumption. India’s manufacturing sector has been experiencing rapid growth due to strong demand and industrial output. The consultant expects the industrial sector to continue attracting investment inflows, supported by domestic consumption upturn and growing demand from third-party logistics players and the manufacturing sector.

    On the other hand, investments in alternative assets, including data centers, life sciences, senior housing, holiday homes, and student housing, witnessed a decline of 60 percent, amounting to USD 158.2 million in January-June compared to USD 398.8 million in the corresponding period the previous year.

    Overall, across all asset classes, institutional investments in Indian real estate recorded a 43 percent increase, totaling USD 3.7 billion in the first half of the 2023 calendar year, as opposed to USD 2.57 billion during the same period last year. Out of the total inflow, office assets attracted USD 2,719.2 million, a significant rise from USD 1,108.5 million in the year-ago period. However, institutional investments in mixed-use projects experienced a 95 percent decline, falling to USD 15.1 million in the first half of the current fiscal year, down from USD 308 million in the corresponding period of the previous year.

    Surprisingly, retail real estate assets failed to attract any investments in the first half of this year, compared to USD 491.8 million in the corresponding period a year ago.

    The report highlights that institutional investment inflows in Indian real estate have already reached around 75 percent of the total inflows witnessed in 2022, despite a challenging global economic environment.

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