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Investment flows double to $1.1 billion in January-March: Colliers

The office market has made a comeback in terms of investments, with occupiers continuing to see it as a stable income-accruing asset class.

Investments were largely driven by foreign investors, which accounted for about 70% of the inflows during the quarter.
Investments were largely driven by foreign investors, which accounted for about 70% of the inflows during the quarter.

Institutional investments in the real estate sector doubled to $1.1 billion during January to March quarter against last year. The opening up of the economy post the third wave of Covid-19, and an improvement in investors’ sentiment has led to surging investments, compared to the prior quarter. The investment activity during the quarter was driven by some large-sized deals in the office sector.

Investments were largely driven by foreign investors, which accounted for about 70% of the inflows during the quarter. After a drop in 2020, the share of domestic investments has reached 30%, almost the same as pre-pandemic levels, findings from Colliers India, a real estate property consultant show.

Piyush Gupta, managing director (capital markets & investment services), Colliers India, said, “Real estate sector has undergone positive structural changes and performance indicators reflect strong come back across the residential, office, industrial and logistics sectors, with newer themes around technology and digital, clearly emerging. From a city level, Mumbai continues to be the market leader with a share of 25% in total investment inflows. This shows immense confidence of investors in the sector.”

The office market has made a comeback in terms of investments, with occupiers continuing to see it as a stable income-accruing asset class. Moreover, the office market is now recovering with the first quarter seeing stable vacancies for the first time in two years.

The retail sector attracted the second-highest share of investments at 23%, backed by one major transaction. Investment in the retail sector was the highest since the start of the pandemic. Global investors continue to show strong interest in the under construction as well as stabilised retail assets, as they are expecting a revival.

Industrial and logistics assets received inflows of $0.2 billion, accounting for about 16% of total investments. Investor appetite for industrial and logistics assets remained robust backed by strong structural demand from e-commerce and 3PL firms.

Additionally, investors continued to scout for land parcels for in-city warehouses and in the peripheral locations of larger markets. Heightened investment activity is seen on the back of strong demand for modern industrial and logistics assets coupled with a shortage in supply.

However, investments in the residential sector remained muted attracting only $15 million in Q1 2022, just about 1% of the total investments. “The residential sector is witnessing tailwinds amid a significant rebound in sales momentum after a turbulent spell since the NBFC crisis is 2018, followed by the pandemic. In Q1 2022, a major investment group marked the close of an affordable housing fund, one of the largest funds targeted towards residential real estate in India,” he said.

Meanwhile, global REITs and data centre management firms continue to expand their portfolios in India. Investments in data centres continued to grow in Q1 2022 to about $40 million, as global data centre REITs, data centre management firms and hyperscalers continued to invest in India.

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