Institutional Investments in Indian Real Estate Market Decrease by 12% in 2023
Institutional investments in the Indian real estate market witnessed a decline of 12% in 2023, reaching $4.9 billion. This marks the lowest investment in the sector since 2019, when it stood at $6.5 billion. Data released by workplace solutions company Vestian on Thursday underscores the caution demonstrated by investors in the face of global challenges.
Foreign Investments Decline Significantly
Foreign investments decreased by 30%, falling from $3.9 billion in 2022 to $2.7 billion in 2023. Consequently, the share of foreign investment in the overall institutional investment dropped from 79% to 65% within the past year. Foreign investors focused heavily on commercial assets, which accounted for 72% of their investments. The industrial and warehousing sectors followed, constituting 15%.
Domestic Investors Remain Confident
Despite the global slowdown, domestic investors maintained confidence in the industry. Total domestic investments doubled from $687 million in 2022 to $1.5 billion in 2023. The share of domestic investors rose to 35% in 2023, up from 14% in 2022. Domestic investors allocated 42% of their investments to commercial assets, with residential projects receiving 39%.
“The optimism of domestic investors kept the real estate market buoyant as they continued to show confidence in India’s growth story,” said Shrinivas Rao, chief executive officer at Vestian.
Co-Investment Sees a Sharp Decline
Co-investment witnessed a substantial 95% decline, dropping from $360 million in 2022 to $18 million. This is partly attributed to the cautious approach of foreign investors.
Previous Data Indicates a Drop in Institutional Investments
Earlier data from Colliers indicated a decrease in institutional investments during the October-December quarter. These investments totaled $822.3 million, representing a 37% decrease from $1,299.40 million during the same period in the previous year.
Future Projections and Growth Expectations
Vestian predicts a resurgence in institutional investments in 2024, driven by India’s robust pipeline of planned infrastructure projects. The Indian real estate market is expanding rapidly due to new asset classes, increasing the need for funding. Shrinivas Rao believes that the increased demand for capital could lead to high returns for investors.
“As investors anticipate high returns, they may inject capital into the sector, resulting in further growth and expansion, thereby driving the need for higher capital investments.”