India's real estate sector received $1.6 bn investment in Apr-June: Report

The institutional investment worth $1.6 billion was led by foreign investors and commercial assets such as hospitality projects, offices, retail, etc

The Indian real estate sector reported $1.6 billion in institutional investment, according to a report released by Vestian, a commercial real estate consultant. This is a 41 per cent drop in institutional investment compared to the same period last year, when the sector had reported $2.7 billion. However, compared to the previous quarter that ended in March 2023, this is a 29 per cent jump from $1.2 billion.

The Bengaluru-based consulting company's report, “Institutional Investment in Indian Real Estate Q2 2023” outlined how the real estate sector had gradually improved over the last five quarters.

In the second quarter (Q2) of 2022, the real estate sector had reported $2.7 billion in institutional investment with a 81 per cent increase year-on-year (YoY) and 98 per cent increase quarter-on-quarter (QoQ). However, the market took a significant hit in the following quarter when institutional investments fell by 86 per cent QoQ to $0.4 per cent.

 

In the last quarter of 2022, investments surged by a whopping 316 per cent QoQ and 103 per cent YoY to $1.5 billion. This fell again by 19 per cent in the first quarter (Q1) of 2023 to $1.2 billion.

This data shows the volatility but upward trend of the real estate sector.

CEO of Vestian, Shrinivas Rao stated, "This upward trajectory in investments demonstrates renewed interest from institutional investors amidst the challenging macroeconomic landscape. The real estate sector is likely to garner increased traction in the upcoming quarters on the back of robust GDP growth and a strong pipeline of upcoming infrastructure developments.”

 

Commercial assets leading real estate growth

Investments in commercial assets (office, retail, co-working, and hospitality projects) surged to 88 per cent in Q2 2023 from 39 per cent in Q1 2023, indicating a renewed demand for office spaces.

In contrast, the share of the residential sector declined from 27 per cent in Q1 2023 to four per cent in Q2 2023, as lower-yielding investments found less appeal with institutional investors.

Commercial assets received $1,400 million in institutional investments, a 101 per cent YoY increase from $697 million last year and 189 per cent surge compared to Q1 2023 from $485 million.

Residential investment took the largest hit, falling by 92 per cent YoY, from $738 million to $58 million in Q2 2023.

Institutional investment in industrial and warehousing real estate also fell by 87 per cent YoY, from $1,000 million to $134 million in the quarter that ended on 30

 

Foreign investors dominate institutional investment

Foreign investors dominated the total institutional investments received during Q2 2023, with a 92 per cent share as investors are bullish about India’s growth story. Additionally, the majority of the investment deals were multi-city deals, accounting for around 94 per cent.

Rao added, “In the midst of global challenges, a surge in foreign institutional investments suggests that India's real estate sector has a huge upside potential.”