Institutional investments into the office sector constituted the highest share at $2.7 billion during H1 2023, while the total investment inflows into Indian real estate rose 43 percent to $3.7 billion, a report by Colliers India said.
The share of the While a mere 11 percent of Grade A office stock across the top six cities is currently listed as Real Estate Investment Trusts (REITs), there is further unrealised potential for an additional 57 percent."Office sector remained highest in the total inflows during H1 2023 at 74 percent, followed by the residential sector at 12 percent with an investment of $0.4 billion.
"Hinging on the strong domestic economic outlook, the fundamentals of real estate asset classes, including office and residential, amongst others, remain strong and intact," the report added.
While the majority of the existing prominent office projects are already funded by top institutional investors, a healthy supply pipeline of more than 150 million square feet (sq ft), at different stages of development, across the top six cities offers newer investment opportunities in the next three years, the report said.
In Q2 2023, Delhi-NCR saw the highest inflow of investments at $698.1 billion, followed by Mumbai at $348.3 billion.
"The office sector is witnessing a re-calibration globally, and hence the decision to invest is also taking longer. Further, interest rates and inflationary pressures are temporarily keeping investors in a wait-and-watch mode as they reprice the global macro risks," Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers India, said. "Investment inflows into the office sector touched $1.8 billion during Q2 2023, the highest over the last 10 quarters. The rising investments in the sector are attributed to the unwavering confidence of investors amidst robust demand, a healthy supply pipeline, and the presence of three successful REITs in the office market," Vimal Nadar, Senior Director and Head of Research at Colliers India added.
Nadar expects the sector to witness further inflows of investments from both global and domestic investors, alongside scaling up of REITable office stock, in the coming years.
Investments in residential segment surge
Primarily driven by domestic investments, the residential sector experienced a remarkable five-fold increase in investment inflows during H1 2023.
"Investments in residential assets have seen a rebound, led by improved housing demand amidst stable interest rates and healthy affordability levels," the report added.
Industrial assets also saw a near-two-fold increase in investment inflows, led by the sustained growth of the sector amidst rising consumption.
India’s manufacturing sector continues to grow at a rapid pace, owing to strong demand and industrial output. India’s manufacturing Purchasing Managers' Index (PMI) was at a 31-month high during June 2023 amidst robust demand conditions and improved business sentiments, Colliers said.