In these unpredictable times, many are gravitating back toward stable investment avenues, prominently gold and real estate, after a brief fascination with fluctuating cryptocurrencies and NFTs.
According to Colliers, the Indian real estate sector experienced a remarkable rebound in Q2 2024, with institutional investments soaring to a three-year peak of USD 2.5 billion. This impressive growth showcases the robustness of the market and the increasing trust among both domestic and international investors.
Foreign investors played a crucial role in this surge, contributing an astounding 81 percent of total inflows from April to June. The influx of capital from American and United Arab Emirates investors underscores the global confidence in India's real estate landscape.
In the first half of the year, private equity investments in Indian real estate surged to USD 3.5 billion, highlighting the sector's considerable strength and market confidence. Piyush Gupta, Managing Director of Capital Markets & Investment Services at Colliers India, indicates that this positive sentiment is anticipated to continue throughout the year, with foreign investments maintaining a noteworthy 73% share in H1 2024.
"Sustained growth in FDI and Domestic Capital in India Real Estate reciprocates the attractiveness and the positive long-term outlook for infrastructure, construction, and real estate in India. Domestic institutional and retail investor activity in Indian real estate is also expected to remain strong in the second half of the year, driven by healthy economic activity and consumer confidence," Piyush mentioned.
Industrial and Storage Leadership
Among the various investments, USD 1.5 billion, or 61%, was allocated to the industrial and warehousing sectors. Factors such as large transactions and a significant demand—an eleven-fold increase over Q2 2023—for Grade A supply contributed notably to this surge.
The rise in investor interest is primarily fueled by the growth of e-commerce, rapid-commerce, and evolving supply-chain models, setting the stage for future growth in the industrial and warehousing sectors. The market is expected to expand further due to the introduction of AI-enabled warehouses and micro-fulfillment centers in coming quarters.
"Propelled by foreign investments, the industrial & warehousing segment witnessed about half of the total inflows in the first half of 2024," stated Vimal Nadar, Senior Director and Head of Research at Colliers India, referring to the optimistic trajectory. Notably, institutional inflows into this sector for H1 2024 are nearly double those from 2023. With the Manufacturing Purchasing Managers’ (PMI) Index for India lingering around 60.0 recently, investor confidence is likely to sustain in the industrial and warehousing sectors throughout 2024.
Delhi NCR and Bengaluru Are Dormant
Over 70% of the inflows into institutional investments in the last quarter emerged from multi-city transactions. Bengaluru, capturing a significant 16% share of the quarterly inflows, attracted the highest investment, while Delhi NCR followed with 7%.
Bengaluru saw substantial capital inflows directed toward its residential real estate segment, whereas Delhi NCR experienced significant investment in its office sector, leading to an impressive 86% year-over-year rise in capital flows. These regions continue to be vital investment hubs due to their dynamic markets and robust economies.
In addition, the residential segment demonstrated strong growth, making up 21% of all institutional inflows in Q2 2024, marking a remarkable 7.5-fold increase from the previous year. This surge can be attributed to a recovering market and the appeal of residential investments in a developing economy.
Colliers remains optimistic about the Indian real estate market's future, noting that foreign investments dominate the inflows alongside a steady rise in domestic capital. This encouraging trend is expected to be bolstered by anticipated infrastructure projects and continual growth in the residential, industrial, and warehousing sectors.