2025 Will See Increased Capital Inflows For Residential, Office And Industrial Assets

The appetite of investors for Indian real estate is going stronger by the day with institutional investments touching record $6.5 billion inflows in 2024, marking a substantial 22 per cent increase from the previous year's $5.4 billion and the highest annual high for both domestic and foreign investments since 2020. When it comes to the industrial and warehousing segment, institutional investments increased three-fold compared to the inflows in 2023. The segment attracted $2.5 billion investments, accounting for 39 per cent of the total inflows, closely followed by the office segment at 36 per cent share. Rising investments into the segment is a testament to healthy domestic activity, enhancements in logistics efficiency, and the country’s improvements in capabilities as a global manufacturing hub.

Foreign investments drove over 80 per cent of the total inflows in the segment during the year. As per the Colliers India statistics for 2024, the segment accounted for the highest share in overall real estate investment volumes at 39 per cent. Manufacturing and industrial growth in the country was robust, which is reflected in the performance of macro-economic indicators such as Manufacturing Purchasing Manager’s Index (PMI) and Index of Industrial Production (IIP). At $1.1 billion, residential segment too witnessed substantial growth, rising 46 per cent compared to the 2023 levels.

Overall, at $4.3 billion, foreign inflows continued to drive annual real estate investments at 66 per cent share, while domestic investments witnessed a steady rise, surging 27 per cent YoY during the year. Interestingly, the fourth quarter of 2024 was particularly robust, with investments totaling $1.9 billion—2.3X times compared to the same period in 2023. This end-year momentum contributed significantly to higher investment volumes for 2024. Interestingly, domestic investments were significant in Q4 2024 and accounted for 43 per cent of the inflows during the final quarter.

This underscores the growing confidence of India-based institutional investors alongside sustained interest from international counterparts. Investments in the office segment picked up pace in the second half of the year. With $2.3 billion inflows, the segment accounted for a 36 per cent share, and closely followed the industrial and warehousing segment. Foreign investments accounted for about 77 per cent of the inflows in office segment. Additionally, residential assets too witnessed a notable growth at $1.1 billion, a substantial 46 per cent surge on an annual basis driven by sustained interest from domestic players.

Experts are of the view that rising demand for superior quality Grade ‘A’ developments and evolving supply-chain models will continue to incentivise investors in consolidating industrial abd warehousing assets in the country. Furthermore, manufacturing scale-up and healthy consumption levels are likely to attract domestic and global investments in both ready-to-use as well as developmental industrial assets, going ahead. Sector analysts feel that the private equity investments in 2024 were buoyed by robust domestic growth and sustained investor confidence.

Interestingly, APAC investors drove almost one-third of the foreign inflows in the country’s real estate during the year. Looking ahead, Tier-I cities are expected to continue to attract a lion’s share of the capital, amidst government impetus on infrastructure development and the ‘Make in India’ initiative. While global investors’ confidence is likely to remain upbeat, 2025 is likely to see increased capital deployment from domestic players across office, residential and industrial assets.