Investment in real estate up 14% to $2.6 billion in January-June; Delhi-NCR recorded the highest entries

As the real estate sector experiences a recovery from the impact of the coronavirus pandemic, institutional investment in Indian real estate has seen a 14% year-on-year jump to $2.6 billion from January to June 2022. The influx was led by the office sector, which accounted for about 48% share, followed by the retail sector with a 19% share, according to a report by Colliers India.

On a quarterly basis, inflows from April to June 2022 increased from the previous quarter, while registering a 50% jump from the average quarterly inflows of 2021.

“The first half of 2022 saw business euphoria rebound with increased office and industrial leases, retail and travel spending, and continued momentum in the residential sector. However, the market is showing some caution due to geopolitical tensions and rising expected risk-adjusted returns. Investments in India continue to increase in development and operating assets,” said Piyush Gupta, Managing Director (Capital Markets and Investment Services) of Colliers India.

He added that with the current business environment, India will benefit the most from Asian economies with increased capital inflows. Indian real estate is likely to see both equity and credit inflows leveraged by existing and newer investment management platforms.

Domestic investors are back in the market with a 38% share in the first half of 2022, a massive jump from just 13% share in the first half of 2021. Domestic investors were mainly inclined towards mixed-use assets and the sector retail trade. However, investments continue to be driven by foreign investors in which pension funds and sovereign wealth funds are betting on income-generating assets in the office, retail and industrial sectors, according to the report.

Investments in the office sector

During the first half of 2022, the office sector collected around 48% of total investments. Investors are seeing encouraging signs of recovery in the office sector since late last year, Colliers India said.

He added that while a hybrid working style is the dominant way of working, big tech companies continue to rent office space. Investors are taking a medium to long term view of the sector, with the intention of consolidating assets into REITs. As a result, investment in the office sector increased by 20% year-on-year in the first half of 2022.

In the first half of 2022, the retail sector saw a 19% share of investment, with investors turning to completed malls as an avenue for investment. The Indian retail market is witnessing an expansion of fashion brands and F&B (food and beverages). Additionally, malls have seen a healthy recovery in footfall since last year. The industrial & logistics sector and the residential sector recorded moderate inflows in the first half of 2022.

Investment inflows into alternative assets rose 53% year-on-year in the first half of 2022 to around $370 million, indicating that investors are betting big on diversifying their portfolios. Transactions during this period ranged from data centers, vacation homes and life sciences.

Vimal Nadar, Senior Director and Head (Research) at Colliers India, said: “A recession in global markets will affect India. On the positive side, we see this boosting IT services in India. We can expect more investment in global capability centers in India in the coming years. »

He added that there is untapped potential in India’s alternative assets which investors are looking for from a diversification perspective. “During the first half of 2022, inflows into alternative assets represented 14% of total investments. The coming quarters will see greenfield investments, particularly in the office and industrial and logistics sectors.

Regional investment flows

Delhi-NCR recorded the highest share of entries with 35%, followed by Mumbai with an 11% share and Chennai with a 10% share. However, multi-city deals continue to grow, with 43% investment in the first half of 2022. These deals were led by entities for assets in multiple cities.

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