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Institutional investments in real estate sector declined by 17% to $4 bn in 2021

2021 was one of the best years for the industrial and logistics, and residential sectors, accounting for about half of the total investments at about $2 billion (Shutterstock) (HT_PRINT)Premium
2021 was one of the best years for the industrial and logistics, and residential sectors, accounting for about half of the total investments at about $2 billion (Shutterstock) (HT_PRINT)

  • The office sector attracted the highest investments at $1.2 billion, accounting for 31% of the total investments in 2021. However, the commercial office sector constituted 45% of the total $4.8 billion investments in 2020.

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BENGALURU : Real estate institutional investments closed at $4 billion in 2021, a 17% fall compared to the preceding year, which had witnessed the closure of a few large transactions.

Despite the dip, capital flows came on a broad-based recovery across most asset classes, geographies and doubled in the number of deals compared to 2020, as per a note by property advisory Colliers India. 2021 was one of the best years for the industrial and logistics, and residential sectors, accounting for about half of the total investments at about $2 billion.

The office sector attracted the highest investments at $1.2 billion, accounting for 31% of the total investments in 2021. However, the commercial office sector constituted 45% of the total $4.8 billion investments in 2020.

The industrial and logistics sector saw investments rise to a five-year high of $1.1 billion, a five-fold increase from 2020. The sector has been drawing strong operator and investor interest due to increased demand from e-commerce and third-party logistics (3PL) firms post pandemic. This growth momentum is likely to continue in 2022, as global investors and developers continue to expand their footprint in proximity to high consumption areas across Tier I and II cities.

“...The investments across asset classes have seen promising inflows in 2021 reflecting several opportunities for investors to recalibrate their strategy towards growth sectors. This is already evident in the rapid investment being allocated towards the residential, increasing development of data centers, alternatives, industrial, office as well as the evolution of the life science sector. There is a reflection of confidence in the industry to participate in the growth story and hence develop, build and own real assets in long term," said, Piyush Gupta, MD, capital markets and investment services, Colliers India.

2021 has seen good investor appetite for residential and industrial and logistics sectors while office continues to be dominant. The former breached record highs in recent times lapping up nearly $2 billion of the overall institutional investment volumes. This resonates the strong fundamentals and attractive valuations of the underlying assets supported by a positive economic outlook.

“...The broad-based recovery signals signs of ebullience amongst investors and expansion of REITs, asset diversification, imminent potential in industrial and logistics will keep them busy in the Indian market. Moreover, niche asset classes such as data centers, student housing and life science will provide a unique opportunity for investors to diversify their investments," said Vimal Nadar, senior director and head of research, Colliers India.

Inflows in the residential segment witnessed a significant uptick with a two-fold increase year-on-year amid a recovery in the sector and increased demand for capital. Private equity funds are looking at providing capital for fresh investments in residential projects, and also for refinancing or restructuring existing loans of banks and NBFCs.

The luxury segment accounted for about 35% of the total investments, with the rest in mid-income and affordable category projects. Luxury residential projects witnessed increased investments in 2021 as demand for bigger homes and gated communities has significantly increased in the past year.

With increased investments in select luxury residential projects and data centres, Mumbai led the investment pie in 2021 with a 20% share. Foreign private equity investors continued to have the majority share in the investment volumes, but domestic funds have shown higher confidence, compared to last year, led by a steady recovery in the economy.

Investments in the alternatives continued the growth momentum during 2021, led by data centres. Alternate assets (student housing, co-living, life sciences, data centers) accounted for 11% of the total investments in 2021, from 8% in 2020. Data centres garnered the highest share of about 60% in total investments in alternate assets in 2021.

 

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