Despite the global recessionary climate, India’s real estate sector continues to show its resilience. The continued surge in demand on a q-o-q basis across all asset classes has put the spotlight on the sector as the most sought after instrument, prompting various global investors to accelerate their investment inflows in Indian real estate. Owning to this upward growth trajectory of the sector, various global sovereign wealth funds accelerated their investment inflows in India.

Institutional investment inflows into the Indian real estate sector saw a notable 43% year-on-year surge, reaching $3.7 billion in the first half of 2023, with the office segment leading the way. Despite a challenging global economic landscape, these investments already accounted for 75% of the total inflows recorded in 2023, highlighting the sector’s resilience and attractiveness to institutional investors.

The China+ strategy adopted by a lot of corporates also helped India to outshine as a lucrative destination to expand business operations. This directly gave a push to the country’s real estate segment across office, residential and retail, thus further stirring interests among the global investors.

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The strong demand for Grade A office spaces and a lot of corporates setting up their headquarters in key Indian cities are among the reasons why the foreign investors are actively looking to invest in the sector. In the residential segment also there has been a considerable share of foreign investments owing to the improving housing sales and a huge recovery witnessed by the luxury segment.

ADIA, which is one of the biggest global sovereign funds, has active interest in the sector and was looking to invest in the new fund structure of Kotak Investment Advisors, which is a PE arm of Kotak Mahindra Group. In Nov 2022 Kotak Investment Advisors finally secured an anchor investment of $500 million from Abu Dhabi Investment Authority (ADIA) for its 13th Real Estate (RE) Fund, a $1 billion platform targeting real estate investments in India.

Also, as per sources global investor Goldman Sachs is active in the space with an interest to invest $2-3 billion in the Indian real estate over the next 2-3 years. Foreign investments in India have been on the rise over the last few years as the industry underwent an overhaul, with major structural and policy reforms inducing transparency and ease of business operations. It is interesting to note that the share of foreign investment has been impressive, witnessing a 64% share during H1 2023.

The strong momentum exhibited by the logistics and warehousing sector also garnered foreign investment interest. In H1 2023, the warehousing sector accounted for around 9% of the total investment inflows, at $350 mn, a two-fold rise YoY. Foreign investment accounted for 76%of the total inflow in the segment during the period. Proactive policies by the government are among other key reasons for the global funds to pour in, thus putting the real estate sector in a robust spot. The Reserve Bank of India (RBI) recently allowed global investors to invest in the debt instruments of REITs and InvITs wherein they will be able to invest capital via voluntary retention route and mid-term framework.

As a lot of these funds have already emerged as large real estate investors, the upcoming REITs will open new doors to expand their horizon and further boost the country’s real estate sector. The strong momentum exhibited by the logistics and warehousing sector also garnered foreign investment interest. In H1 2023, the warehousing sector accounted for around 25% of the total investment inflows.

Overall, the sentiment of global investors is positive as the real estate sector is at its most exciting phase. According to industry experts, the sector is not only a lucrative investment option for the institutional global investors but also serves as a value creation machinery from a return point of view. It is anticipated that these investors will continue to invest in assets that are across various development cycles to strike the perfect balance between risk and return.

(By Sankey Prasad, CMD, Colliers India. Views are personal)