Institutional investments in Indian real estate touched USD1.1 billion during Q1 2022, doubling from the same period last year. The opening up of the economy post the third wave of Covid -19 infections, and an improvement in investors’ sentiment has led to surging investments, compared to the prior quarter. The investment activity during the quarter was driven by some large-sized deals in the office sector.
Investments were largely driven by foreign investors, that accounted for about 70% of the inflows during the quarter. Interestingly, after a drop in 2020, the share of domestic investments has reached 30%, almost the same as pre-pandemic levels. This shows a resurgence in the confidence of domestic investors.
Piyush Gupta, Managing Director, Capital Markets & Investment Services, Colliers India, said, “Real estate sector has undergone positive structural changes and performance indicators reflect strong come back across Residential, Office, Industrial, Logistics sectors, with newer themes around technology and digital clearly emerging. Investors, both domestic and global are appearing bullish on Indian real estate supported by pro-growth government policies with a long-term view to develop and hold assets. From a city level, Mumbai continues to be the market leader with a share of 25% in total investment inflows. This shows immense confidence of investors in the sector”.
The office market has made a comeback in terms of investments, with occupiers continuing to see it as a stable income-accruing asset class. Moreover, the office market is now recovering with Q1 2022 seeing stable vacancies for the first time in two years. The retail sector attracted the second-highest share of investments at 23%, backed by one major transaction. Investment in the retail sector was the highest since the start of the pandemic. Global investors continue to show strong interest in under construction as well as stabilized retail assets, as they are expecting a revival.
Industrial and logistics assets received inflows of 0.2 USD billion, accounting for about 16% of total investments. Investor appetite for industrial and logistics assets remained robust backed by strong structural demand from e-commerce and 3PL firms. Investors continued to scout for land parcels for in-city warehouses and in the peripheral locations of larger markets. Heightened investment activity is seen on the back of strong demand for modern industrial and logistics assets coupled with a shortage in supply.
Vimal Nadar, Senior Director and Head of Research, Colliers India, said, “Multi-city deals accounted for 65% of the total investments in Q1 2022 as investors laid focus on entering into strategic alliances with leading developers and on acquiring/developing portfolios across multiple cities. We are also seeing the creation of platforms for investment in specific asset classes, especially across the commercial office and industrial asset classes.”
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