Beacon of stability: Indian realty saw record-breaking institutional investments in 2023; domestic players drive growth

Foreign capital accounts for 67% of total investment in Indian realty, but the domestic investor segment saw a 66% annual jump, reaching $1.7 billion and securing a 32% share.

Shivangini
Updated1 Jan 2024
Investors from the APAC region showed an increasing appetite for Indian real estate, contributing about half of the total foreign inflows during 2023. (Goutam das/Mint)
Investors from the APAC region showed an increasing appetite for Indian real estate, contributing about half of the total foreign inflows during 2023. (Goutam das/Mint)

While global investment markets reeled under uncertainties, Indian real estate emerged as a haven of stability in 2023, attracting a record-breaking USD 5.4 billion and proving its resilience again. This bullish surge, a 10 per cent increase from 2022, paints a vibrant picture of India's flourishing economy and cements the country's position as a prime destination for international capital, according to a report by Colliers India.

“As India's real estate sector closes yet another promising year, institutional investments saw an increase of 10 per cent and stands at USD 5.4 billion—the highest since 2020. The investments in Indian real estate are more broad-based, with significant investments coming into education, shared spaces, and data centres, adding to a strong domestic upcycle in office, residential, and industrial areas," said Piyush Gupta, Managing Director of Capital Markets & Investment Services at Colliers India.

"Investors from the APAC region have been showing an increasing appetite for Indian real estate, contributing to about half of the total foreign inflows during 2023. Looking ahead to 2024, investment activity will likely remain unabated backed by robust domestic economic fundamentals, while a strategic integration of technology and ESG will play out in investment decisions.”

Investment inflows (USD million) (Note: Alternate assets include data centres, life sciences, senior housing, holiday homes, student housing, schools etc)

The story, however, was intriguing when the sources of this investment were looked at. While foreign capital still reigns supreme, accounting for 67 per cent of the total inflow, the rise of domestic investors is the true game-changer. The segment witnessed a staggering 66 per cent annual jump, reaching USD1.7 billion and securing a 32 per cent share of the pie. This shift signifies a growing trust in India's real estate landscape from within, further fuelling the investment engine, the report further added.

Colliers India: City-wise investment inflows in 2023 and 2022 in USD million

The office sector remains the undisputed king, attracting a whopping 56 per cent of the total inflows. Global giants and domestic players alike flocked towards completed and income-generating properties, showcasing unwavering faith in the future of India's workspaces.

Investment in alternative assets in India started slowly in 2023, but roared back in the final quarter, pushing the yearly total to USD 650 million. A whopping 65 per cent of all alternative investments poured in during Q4, with student housing leading the charge, grabbing 60 per cent of the alternative inflows, as per the report.

“In the ever-evolving tapestry of India's real estate landscape, while investors continue to diversify portfolios, the office sector continues to enjoy significant affinity. Fuelled by strong demand for Grade A commercial developments, investments in the office sector continue to grow from strength to strength. As 2023 witnessed record-breaking office space leasing activity, global institutional investors remained committed to building office portfolios in India. Office-led investments had a commanding 56% share in total real estate inflows in 2023. Along with envisaged momentum in alternative assets, industrial & warehousing, and residential sectors in the next few quarters, the office sector will continue to dictate India's real estate investment ecosystem,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.

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