Industrial and warehousing players and Centre must consolidate the momentum
Following a steady start in Q1 2024, Q2 2024 has seen an accelerated momentum in Indian real estate sector, registering $2.5 billion of inflows—the highest in any quarter since 2021. The industrial and warehousing segment accounted for the highest share of 61 per cent of total investments, at $1.5 billion. The residential segment also witnessed a significant rise in quarterly inflows, 7.5X times compared to Q2 2023, capturing a 21 per cent share of total institutional inflows into Indian real estate.In contrast, with $0.3 billion of investments in office assets, the segment witnessed subdued activity in Q2 2024. Although the annual decline was significant at 83 per cent, the QoQ drop was relatively modest at 41 per cent.
The surge in industrial and warehousing and residential investments led to a healthy investment volume of $3.5 billion for H1 2024 at an overall level, making up for the slow start in first quarter. Foreign investments remained robust, while accounting for 81 per cent of the total inflows in Q2 2024, predominantly led by investors from the US and UA says a recent study by Colliers India.Quite significantly, private equity investments in real estate have shown remarkable resilience in the first half of the year at $3.5 billion, reflecting robust market confidence.
With foreign investments leading the charge at a significant 73 per cent share in H1 2024, the sustained momentum is expected to drive positive sentiment for the entire year. Sustained growth in FDI and domestic capital in India real estate reciprocates the positive long-term outlook for infrastructure, construction and real estate in India. The domestic institutional and retail investor activity in real estate is also expected to remain strong in second half of the year, driven by healthy economic activity and consumer confidence.During Q2 2024, institutional investments in industrial and warehousing segment rose manifold, 11X times compared to Q2’2023 led by select large deals in the segment.
Amidst rising demand for superior quality Grade A supply and the evolving supply-chain models, investor confidence in the segment has been duly bolstered. With the healthy demand momentum, global as well as domestic investors will play a prominent role in consolidation of industrial and warehousing assets in the country.
Amidst significant spurt in E-commerce and retail consumption in India, various asset-level investors are likely to enter the market, boosting the demand for AI enabled warehouses and micro-fulfillment centers in the upcoming quarters.Driven by foreign investments, the industrial and warehousing segment witnessed about half of the total inflows in the first half of 2024. Interestingly, institutional investments in the segment for H1 2024 are almost twice the inflows in the entirety of 2023. With India's Manufacturing Purchasing Managers' (PMI) Index staying close to 60in the last few months, investor confidence in this particular segment is likely to remain strong in throughout 2024.
Furthermore, strategic infrastructure projects such as Dedicated Freight Corridors (DFCs) and Bharatmala and robust government policies like the National Logistics Policy, underscore substantial long-term growth opportunities for the industrial and warehousing segment, much to the delight of the realty sector.Now the onus is on the sector and the government tokeep this momentum going.