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Global investors are expressing increased confidence in India's real estate sector, driven by government initiatives and reforms that enhance transparency and accountability. In 2023, the sector saw a substantial inflow of institutional investments, exceeding USD 5.8 billion across 53 deals—a 14% surge from 2022. Notably, equity investments dominated, constituting an 81% share, signaling a growing risk appetite for Indian real estate assets among global institutional investors.
Despite global economic uncertainties, particularly inflation and directional uncertainty, institutional investments in India surpassed USD 5 billion, a trend since 2018. Multiple rate hikes in the Americas led to decreased investment activities from the US and Canada. However, 2023 witnessed a noteworthy contribution from the Asia Pacific region.
Senior Managing Director & Head of Capital Markets at JLL India, Lata Pillai, emphasized that inflation and global economic uncertainty did not deter institutional investments in India. Foreign institutional investors played a significant role, contributing 63%, while domestic investors substantially increased their participation to 37%, compared to an average of 19% in the previous five years.
Srini Sriniwasan, MD of Kotak Alternate Asset Managers, highlighted the skewing of global investment data in India's real estate, noting that large deals often involve equity in acquiring assets like office parks, while debt investments dominate the development-risk-associated residential sector.
Looking ahead, Sriniwasan sees strong prospects for India's residential and office markets, propelled by economic growth and the establishment of more Global Capability Centres (GCCs). Pillai shares an optimistic view for India's domestic economy in 2024, emphasizing its resilience and growth trajectory despite potential delays in decision-making due to upcoming elections. She attributes this robust outlook to India's inherent strengths and continued focus on economic development.
The real estate sector's transformation is attributed to policy initiatives, including the introduction of Real Estate Investment Trusts (REITs), the Real Estate Regulation and Development Act (RERA), and progressive relaxation in foreign direct investment norms. The Americas, traditionally significant contributors, experienced a notable dip to a 23% share of investments. This decline was compensated by increased contributions from the Asia Pacific region, particularly Singapore and Japan.
In 2023, non-core assets led transaction volumes at 53%, indicating investors' higher risk appetite and a focus on potentially higher returns. The office sector maintained its dominance, representing 52% of total investments, with a 61% increase in capital flow—from USD 1.8 billion in 2022 to USD 3 billion in 2023—across 15 deals. The year also saw the announcement of USD 2.8 billion in platform commitments over the next few years. A major commitment involved Ivanhoe Cambridge and Mapletree, with an investment capacity exceeding USD 1.8 billion, focusing on technology-led offices in India.
While the office sector is anticipated to remain a favored segment in 2024, newer sectors like warehousing, data centers, and student housing are expected to attract a significant share of institutional investments in the coming years, reflecting the evolving dynamics of India's real estate landscape.
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