Fund inflows in realty rise 37% YoY in Q1

Mumbai: Institutional investments in real estate remained strong during Q1 2023 at $1.7 billion, led by office sector, lending an optimistic outlook for the year. The office sector continued to drive the investment inflows accounting for 55 per cent of the total inflows during the quarter, followed by residential sector at 22 per cent share. Investment inflows in office sector rose by 41 per cent YoY at $0.9 billion, led by select large deals. Owing to the strong growth prospects in office sector, key institutional investors are entering into strategic partnerships to strengthen their presence and expand their office portfolio in India.

Taking to Bizz Buzz, Vimal Nadar, Senior Director & Head of Research, Colliers India says, “Despite the prevailing bleak global economic environment looming large at the domestic service sector, large multinational investors continue to place their long term bet on the India office sector. Investments into office sector grew 1.4X during Q1 2023 YoY as opportunities galore for developers, investors & occupiers in the coming times.”

Also, large investment houses continue to diversify to strengthen their portfolio & ensure higher blended return, thus alternative assets garnered nearly 4x investments YoY during the quarter at nearly $160 million, he said

According to Nadar, “Foreign investments accounted for about 93 per cent of the total investments in office assets during Q1. Led by increased opportunity, we are likely to see more collaborations to develop platforms for developing high quality Grade A office assets.”

Investments from domestic investors rose 4X YoY during the quarter. Domestic investors remained committed towards residential assets during the quarter, despite higher lending rates. On the other hand, global investors remained inclined towards office and industrial assets, and dominated the total investment inflows at 76 per cent share. Larger markets such as Delhi-NCR and Bengaluru attracted one-third of the total investments during the quarter, led by increased activity in these markets. However, majority of the inflows (63 per cent) were through multi-city deals.

Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers India, says, “Indian real estate investment cycle is now transitioning into a phase to witness secondary market transactions and may see more institutional owners partially or fully divesting portfolios. In the coming quarters, we shall see some large quality assets traded in office and select logistics assets. The preference of India in developing Asia Pacific markets is getting stronger.”

Investment inflows in industrial assets witnessed a 20 per cent YoY rise during Q1 2023 at $216.3 million, led by foreign investments. Industrial sector is witnessing consistent growth owing to increased opportunities in manufacturing, favourable government policies and growth in E-commerce, leading to a significant amount of investible assets in the region.

Along with core assets, investors also continued to allocate funds towards alternative assets and infused $158.2 million, 4X more than same period last year. Significant inflows in the alternatives were led by a large deal in the hospitality sector. This portfolio diversification has enhanced the ability of many funds to grow their portfolios and remain resilient in these uncertain market conditions.