The buildup looks good for Indian realty

Institutional investments in India’s real estate sector remained robust at $1.7 billion in the first quarter of 2023, driven by the office sector and global funds, signalling a positive outlook for the year, according to a Colliers India study. The office sector was the leading driver of the investment inflows, accounting for 55% of the total during the January-March period. The residential sector was next at 22%. At $0.9 billion, investments in the office sector were 41% higher year on year, with large deals leading the way.

“The Indian real estate investment cycle is now transitioning into a phase where we will witness secondary market transactions and may see more institutional owners partially or fully divesting portfolios. In the coming quarters, we shall see some large, quality assets traded in the office and select logistics assets. The preference of India in developing Asia-Pacific markets is getting stronger,” said Piyush Gupta, managing director, capital markets & investment, Colliers India.

In Q1 2023, foreign investments represented about 93% of the total investments in office assets, driven by a rise in opportunities and platform deals for developing Grade-A office assets.

“India’s office sector is experiencing sustained interest in investment, with increasing interest from foreign investors. The investments in the office sector reflect a bullish outlook for the country’s real estate market. We have seen a clear pattern of domestic and service companies taking up new spaces and expanding, validating the optimism in the sector,” said Quaiser Parvez, chief executive of Blackstone-owned Nucleus Office Parks.

Several significant deals were finalised in the office and residential segments recently, including the Embassy Group’s successful ₹1,469 crore funding for office assets from Bain Capital and Embassy REIT’s purchase of assets worth ₹408 crore from Embassy Sponsor. Realty developer M3M secured a ₹1,809-crore debt facility from alternative investment firm PAG Credit & Markets for residential development.

According to the report, domestic investments in real estate surged four times year on year during the quarter, with a focus on the residential segment, despite higher lending rates. Meanwhile, global investors maintained a preference for office and industrial assets, accounting for 76% of total investment inflows. Large markets like the National Capital Region and Bengaluru garnered one-third of total investments, primarily due to increased activity, while multi-city deals accounted for 63% of the inflows.