Foreign Investment in Indian Real Estate Surges
India's real estate market witnessed a significant rebound in foreign investments during 2023, experiencing a remarkable 20% increase to reach $3.6 billion, compared to the previous year. This influx of capital extended beyond conventional investment avenues, diversifying into alternative asset classes and contributing to the substantial expansion observed within the domestic office, residential, and industrial segments. The nation's robust economy, favorable investment climate, and rapid urbanization have solidified its standing as a highly appealing investment hub within the Asia-Pacific region.
This positive momentum has captured the interest of numerous new funds actively exploring the Indian market. Simultaneously, established global and sovereign wealth funds, such as Mubadala, Mitsubishi Fudson, PAG Credit & Markets, Cadillac Fairview, Korea Investment Corp, and PNB Malaysia, are either augmenting their existing investments or forging new partnerships to capitalize on the abundant opportunities emerging within this dynamic market.
"2024 is expected to be a more dynamic year for both the Asia Pacific real estate markets and capital in the region, which will remain the dominant investor in global real estate. “The ability to act quickly, dig deeply into markets and sectors to identify value, and form productive partnerships will be critical to capitalizing on the region’s diversity and increased opportunity,” said Chris Pilgrim, Collier’s Managing Director of Global Capital Markets, APAC.
India: A Prime Investment Destination
India's economic resilience, coupled with a conducive investment environment and rapid urbanization, has positioned it as a sought-after destination for international funds. The International Monetary Fund (IMF) projects a 5.7% GDP growth for India by 2024, reaffirming its status as one of the world's fastest-growing economies and a preferred choice among emerging Asia-Pacific nations. The nation's allure stems from attractive pricing, competitive valuations, and promising yields, which are particularly appealing to investors in search of lucrative opportunities.
With the anticipated entry of new funds into the Indian market, sustained investor engagement is expected. Renewed interest is anticipated across various segments, including residential, industrial, alternative sectors, and income-generating office properties. The residential, industrial, and alternative asset classes, alongside income-producing office spaces, anticipate renewed interest and investment.
"Investments in Indian real estate have been consistent in recent years, and they are likely to grow further as demand for capital changes structurally. Global investors have always been at the forefront, investing an average of $4 billion annually for the last five years, demonstrating their continued commitment and confidence in the sector. With an increase in performance credit, special situations, portfolio acquisitions, asset reconstruction, and related structures, the sector is expected to attract even more investment in the coming years,” said Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers India.
Growing Interest from APAC Countries
While the United States and Canada remain key sources of capital, major economies within the Asia-Pacific region, such as Singapore, Hong Kong, South Korea, and Japan, have demonstrated an increasing focus on India's thriving real estate landscape. Investment inflows from the APAC region surged by an impressive 57% year-on-year in 2023, reaching $1.8 billion, with a significant portion—70%—directed towards office assets.
Beyond office properties, APAC countries have also exhibited a growing interest in the residential, industrial, and warehousing sectors within India. The sheer volume of investments has virtually doubled since 2019, signifying a notable surge in investor confidence and enthusiasm towards the Indian real estate market.
A Positive Outlook for 2024
Looking ahead to 2024, expectations suggest a deepening engagement from investors within India's real estate sector. This growing interest is fueled by the country's strong economic trajectory, supportive business environment, and increasing demand across numerous industries. The projected surge in activity underscores the confidence in the policy landscape, a convergence in expectations between buyers and sellers, and investors' willingness to allocate more capital into diverse real estate asset classes.
"In 2023, foreign investors accounted for 90% of all investment inflows into India’s office sector, demonstrating the strength of the underlying asset class. The industry is currently transforming. Furthermore, as sustainability becomes more important in investment decisions, the real estate sector, including India’s office market, is poised to align seamlessly with global Environmental, Social, and Governance (ESG) standards,” said Vimal Nadar, Senior Director and Head of Research at Colliers India.