Institutional investments in real estate remained strong during Q1 2023 at USD1.7 Bn, led by office sector, lending an optimistic outlook for the year. The office sector continued to drive the investment inflows accounting for 55% of the total inflows during the quarter, followed by residential sector at 22% share. Investment inflows in office sector rose by 41% YoY at USD0.9Bn, led by select large deals. Owing to the strong growth prospects in office sector, key institutional investors are entering into strategic partnerships to strengthen their presence and expand their office portfolio in India.
Investments from domestic investors rose 4X YoY during the quarter. Domestic investors remained committed towards residential assets during the quarter, despite higher lending rates. On the other hand, global investors remained inclined towards office and industrial assets, and dominated the total investment inflows at 76% share. Larger markets such as Delhi-NCR and Bengaluru attracted 1/3rd of the total investments during the quarter, led by increased activity in these markets. However, majority of the inflows (63%) were through multi-city deals.
City wise investment inflows (USD million)
| City | Q1 2022 | Q1 2023 | YoY Change | Share Q1 2023 (%) |
| Bengaluru | 16.7 | 196.6 | 1077% | 12% |
| Chennai | 39.8 | – | -100% | 0% |
| Delhi NCR | 130.9 | 380.9 | 191% | 23% |
| Hyderabad | – | – | – | 0% |
| Mumbai | 286.1 | 40.8 | -86% | 2% |
| Pune | – | – | – | 0% |
| Others/ Multi City | 740.6 | 1040.0 | 40% | 63% |
| Total | 1214.1 | 1658.3 | 37% | 100% |
Note:
The data has been compiled as per available information in the public domain
The institutional flow of funds includes investments by family offices, foreign corporate groups, foreign banks, proprietary books, pension funds, private equity, real estate fund-cum-developers, foreign-funded NBFCs and sovereign wealth funds.
“Indian real estate investment cycle is now transitioning into a phase to 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 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 Services at Colliers India.
Investments inflows –
| Asset Class | Investments Q1 2022 (in USD mn) | Investments Q1 2023 (in USD mn) | % Change |
| Office | 643.6 | 907.6 | 41% |
| Retail | 257.0 | – | -100% |
| Alternate assets* | 39.8 | 158.2 | 298% |
| Mixed use | 77.3 | 15.1 | -80% |
| Industrial & Warehousing | 179.9 | 216.3 | 20% |
| Residential | 16.5 | 361.1 | 2087% |
| Total | 1,214.1 | 1658.3 | 37% |
*Note: Alternate assets include data centres, life sciences, senior housing, holiday homes, student housing, etc.
Source: Colliers
“Global institutional investors’ appetite for office assets remains strong owing to India’s growing talent pool, digitization, enhanced transparency in deal structures and stable returns. Foreign investments accounted for about 93% of the total investments in office assets during Q1 2023. Led by increased opportunity, we are likely to see more collaborations to develop platforms for developing high quality Grade A office assets.” Vimal Nadar, Senior Director & Head of Research, Colliers India.
Investments in industrial assets surge; alternatives continue the momentum
Investment inflows in industrial assets witnessed a 20% YoY rise during Q1 2023 at USD216.3 mn, led by foreign investments. Industrial sector is witnessing consistent growth owing to increased opportunities in manufacturing, favourable government policies and growth in E-commerce, leading to a significant amount of investible assets in the region. Along with core assets, investors also continued to allocate funds towards alternative assets and infused USD158.2 mn, 4X more than same period last year. Significant inflows in the alternatives wash led by a large deal in the hospitality sector. This portfolio diversification has enhanced the ability of many funds to grow their portfolios and remain resilient in these uncertain market conditions.
