Real estate investment up 9% at ₹43780 cr in 2019, led by foreign funds: Report

Investment in Indian real estate sector is estimated to have increased by 9% to ₹43,780 crore during this calendar year on higher inflow from foreign funds, according to global property consultant Colliers.

Office properties attracted 46% of the total inflow and received nearly ₹20,000 crore this year.

"Investment in India’s real estate rose 8.7% in 2019 compared to 2018, and touched $6.2 billion ( ₹43,780 crore)," Colliers said in a report.

Foreign funds accounted for about 78% of the total investments in 2019– the highest share ever.

During 2020, Colliers projects inflows of $6.5 billion ( ₹46,170 crore) into the real estate sector.

"We recommend investors to look at opportunistic assets including under-construction office assets, supported by strong demand dynamics in information technology (IT)-led markets such as Bengaluru, Hyderabad and Pune, offering ample opportunities to investors” said Sankey Prasad, managing director and chairman at Colliers International India.

Commercial office assets accounted for 46% of the total inflows during 2019 totaling $2.8 billion ( ₹19,900 crore) with the sector backed by strong demand dynamics and rental appreciation. The interest in office assets is backed by robust demand and rental appreciation.

The consultants expect investors to remain focused on acquiring commercial office assets over the next three years, backed by strong occupier demand and rental appreciation.

Alongside Mumbai and Delhi-NCR, Bengaluru should continue to rank among the most attractive markets.

During 2020-2023, Colliers projected an annual average gross absorption at 52 million sq ft across the top seven cities, surpassing the gross absorption of the preceding five years by 12%.

"We expect a flurry of commercial investment activity in 2020 and 2021 as funds aggregate assets to list them as real estate investment trusts (REITs)," the report said.

While the office sector is recording solid growth in investments, India's residential real estate is experiencing prolonged slowdown in investment volume, accounting for only 9% of the total investments in 2019.

Colliers expect investments in the residential segment to remain soft during 2020, as liquidity concerns in non-banking financial companies (NBFCs) remain.

"Despite the ongoing economic slowdown, foreign funds are likely to gain a stronger foothold in Indian realty. Foreign private equity, including pension and sovereign funds, are looking at India for the long term, undeterred by the current slowdown," said Megha Maan, senior associate director, Research at Colliers International India.

Bengaluru emerged to the second spot overtaking Delhi-NCR in terms of garnering investments with an investment of $655 million ( ₹4,650 crore) during 2019.

Mumbai continued to be at the forefront of investments with a 25% of the total investment inflows in 2019. The city continues to be the most sought after investment destination in the country due to a wide range of asset classes, providing diversification to investors' portfolio.

Colliers has operations in 68 countries and 14,000 employees. In 2018, its revenues were $2.8 billion ($3.3 billion including affiliates), with more than $ 26 billion of assets under management.