Institutional investments in Indian realty on the rise
Investors are enthused by the recovery seen across the Indian real estate spectrum, after Covid-19-induced disruptions
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Mumbai: Institutional investments in Indian real estate touched $2.6 billion during H1 2022, a 14 per cent rise from H1 2021. Investors are enthused by the recovery seen across the Indian real estate spectrum, after Covid-19-induced disruptions.
The inflows during H1 2022 were led by the office sector which accounted for about 48 per cent share, followed by the retail sector with a share of 19 per cent. On a quarterly basis, inflows into Q2 2022 have increased from the preceding quarter, while registering a 50 per cent increase from the average quarterly inflows of 2021.
Talking to Bizz Buzz, Vimal Nadar, Head of Research, Colliers India, said: "While commercial office continues to reign institutional inflows into real estate, retail is making a steady and strong comeback. The retail sector attracted nearly 19 per cent of the overall inflows during the first half of 2022, as investors eye operationally sustainable and profitable completed assets."
At the same time, there is immense untapped potential in alternative assets, which saw a major fillip during this period, he added. The first half of 2022 has witnessed euphoria of businesses bouncing back with increased office and industrial leasing, retail and travel spend, and continued buoyancy in the residential sector.
However, the market is seeing some caution on account of geopolitical tensions and increased expected risk-adjusted returns. Investments in India continue to increase in both development and operating assets. With the current business environment, India will benefit the most from the Asian economies with increased Capital inflows.
Piyush Gupta, Managing Director, Capital Markets & Investment Services, Colliers India, said: "The Indian Real Estate likely to witness both equity and credit inflows tapped by existing and newer Investment Management platforms."
Interestingly, domestic investors are back in the market with a 38 percent share in H1 2022, a massive jump from just 13 per cent share inH1 2021. Domestic investors were majorly inclined towards mixed-use assets and the retail sector. However, investments continue to be driven by foreign investors wherein pension and sovereign funds are betting on income-yielding assets in the office, retail and industrial sectors.
Office sector continues to rule inflows with a 48 per cent share in H1 2022.During H1 2022, the office sector garnered about 48 per cent of the investments. Investors are seeing encouraging signs of revival in the office sector since late last year. While a hybrid style of work is the dominant mode of working, large technology corporates continue to lap up office spaces. Investors are taking a medium to a long view of the sector, with the intention of bunding assets into REITs. As a result, investments in the office sector rose 20 per cent YoY in H12022.
During H1 2022, the retail sector saw a 19 per cent share in investments as investors look toward completed malls as an investment avenue. India's retail market is seeing an expansion of fashion and F&B brands. Also, malls have been seeing a healthy pick-up in footfalls since last year. The industrial & logistics sector and the residential sector saw subdued inflows during H1 2022.
Investments inflows into alternate assets rose 53 per cent YoY during H1 2022 to about $370 million, indicating that investors are betting big on diversifying their portfolios. Deals during this period ranged from data centres, holiday homes and life sciences.
A recession in the global markets will have some bearing on India. On the positive side, we see this boosting IT services in India. We can expect more investments in global capability centres in India over thenext few years. Moreover, there is untapped potential in India's alternate assets which investors are looking for from a diversification perspective. During H1 2022, inflows in alternate assets accounted for 14 per cent of total investments.
The next few quarters will see some greenfield investments, especially in the office and industrial & logistics sector, Nadar said. Delhi-NCR saw the highest chunk of inflows, but multi-city deals most popular. Delhi NCR saw the highest share of inflows at 35 per cent, followed by Mumbai with an 11per cent share and Chennai with a 10 per cent share. However, multi-city deals continue to be on the rise, with a 43 percent in investments during H1 2022. These deals were entity-led for assets across multiple cities.
