Even as the real estate in the country surged in the year 2022, overall investments in Indian realty touched $4.9 billion during the year, registering a hike of 20 per cent year-on-year. Institutional investors remain enthused by the potential of the Indian realty market, albeit in a cautious environment, according to a report by real estate consultancy firm Colliers.
It added that this comes at a time when investors are staring at high-interest rates, coupled with high inflation, apart from recessionary concerns and geopolitical tensions in some countries which may dampen fund deployment on a short-term basis.
Colliers also said global investors are attracted to the stable demand dynamics across asset classes, and opportunities to invest in operating and developing assets in the market. While global investors continue to dominate funding activities with higher participation in entity-led deals, domestic investors have also become more active in the market.
Vimal Nadar, senior director and head of research of Colliers India, said, “The share of domestic investment inflows in 2022 has surpassed the share in 2021, accounting for 22 per cent share in total inflows. Residential assets continue to account for a chunk of domestic investments. Overall, though the total investment inflows are yet to outrun the pre-pandemic levels, investors remain vested in India’s real estate even in challenging times. Large global investors will continue to partner with domestic firms to set up investment platforms.”
Alternate Realty Assets
The report said institutional investments in Indian real estate’s alternate asset classes touched a new high in 2022 at USD0.9 billion, accounting for 18 per cent of the inflows during the year. Investments into alternate assets, which saw a hike of 92 per cent YoY in investments during 2022, have jumped more than four-fold since 2019.
Inflows have seen a sharp jump in 2022 as investors pumped into money into some of India’s emerging sectors like data centers, life sciences, etc. The growth of alternate sectors is led by investors looking to diversify their portfolio, given steady returns in some traditional asset classes.
“While inflows in alternate assets peaked, inflows into the office sector continued its dominant streak in 2022 as well, accounting for 41 per cent share in total inflows. Inflows into the sector rose 50 per cent YoY led by some large deals. As investors eye building a portfolio that they can bundle up as REITs, they continue to see resilience in greenfield and ready-to-move assets. A majority of the deals in the office sector were driven by global investors, who are looking at income-yielding assets,” Colliers said.
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