Institutional investment in India’s real estate sector maintained steady momentum throughout 2023 at $5.4 billion, up 10% year-on-year. The year saw the highest level of investment inflows since 2020, demonstrating India’s resilience despite global market uncertainties.
While foreign investment continued to dominate, accounting for 67% of total annual inflows, domestic investment also recorded an impressive 66% annual growth to $1.7 billion.
The office sector remains the largest contributor to real estate investment in 2023, accounting for 56% of total inflows and attracting both domestic and international capital. Overall investment inflows remained strong for the year, but moderated in the final quarter of the year. His investments totaled $800 million in the fourth quarter, down 37% year-over-year.
Meanwhile, the share of alternatives in total inflows in Q4 2023 was 51%, indicating strong demand in segments such as data centers, student housing, life sciences, and schools.
While major global investment markets face downside risks, India maintained its position as one of the fastest growing economies while maintaining investor confidence. While inflows from the US will decline in 2023 compared to 2020 levels, Canada and Singapore are increasingly establishing themselves as major sources of foreign capital in Indian real estate.
These two countries accounted for 78% of global real estate inflows to India in 2023. Notably, investment inflows from APAC countries have been increasing every year, and in 2023 he surged 3.6 times compared to 2020. Investors continue to view India favorably. thanks to strong economic performance, improved regulatory framework and sustained demand across various real estate segments.
Domestic investors are emerging as active contributors, accounting for 32% of total real estate investment in 2023, compared to 22% in 2022. While the office market continues to be a top choice, supported by investments from global companies, domestic investors are increasingly looking at alternative investments. and housing equity.
Investment inflows into the office sector in 2023 were $3 billion, up 53% year-on-year, driven by some large deals. This increase reflects growing interest in completed and pre-lease income-producing office assets and demonstrates continued investor confidence in the sector’s long-term potential. In particular, investors are actively establishing joint venture (JV) platforms to take advantage of new opportunities and participate in existing and upcoming office projects. In 2023, several important platforms were established for the development of office and residential assets.
The industrial and warehousing sector recorded a remarkable two-fold increase with an inflow of approximately $900 million, making it the highest increase of all sectors in 2023. This extraordinary growth is due to the sustained expansion of the industrial sector due to rising consumption levels.
As the sector evolves, we will see more consolidation as well as more unionization in the sector. With micro-fulfillment centres, dark stores and AI-driven supply chains becoming an integral part of the industrial and warehousing sector, foreign investment in this sector is expected to increase several times over the next few years.
After a slowdown in activity in the first three quarters, investment in alternatives rebounded in the last quarter, bringing total inflows into alternatives for the year to $650 million. The fourth quarter of 2023 accounted for 65% of his total investments in alternatives in 2023. Student housing accounted for approximately 60% of the year’s investment inflows into alternatives.
The increased interest of educational institutions is driven by rapid increases in higher education enrollment, favorable population distribution patterns, and increasing migration of students to urban areas. This trend reflects the constant realignment of investor and developer interests to match student preferences for quality and purpose-built accommodation.
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