From 2017 to 2022, India saw cumulative foreign institutional inflows into real estate of $26.6 billion, a threefold increase from the prior six years, according to Colliers.
According to Colliers’ “India: High on Investors’ Agenda’ study, foreign investments have increased in India over the past few years as the economy has undergone important structural and policy reforms that have increased transparency and made doing business easier.
Strong business and economic fundamentals are also boosting institutional investors’ attitudes and motivating them to form strategic alliances to diversify their holdings.
Approximately 45% of all foreign inflows between 2017 and 2022 went to the office sector, which experienced the biggest investments. Although investors are still optimistic about office properties, they are becoming increasingly interested in alternative assets, according to Sankey Prasad, Chairman, and Managing Director at Colliers India.
Given India’s resilience, rosy economic outlook, and excellent growth prospects in comparison to its international peers, foreign investors have favorably viewed Indian real estate over the years.
The research states that 81% of all real estate investments made between 2017 and 2022 were made abroad, which is a sizable portion. Global investors have been enticed to engage in India’s real estate sector by the nation’s investor-friendly FDI rules, enhanced deal transparency, and higher investment limits through the direct method.
The office sector led a 37% YoY increase in institutional real estate investments, which totaled $1.7 billion in Q1 2023.
“Over the next few years, opportunities will abound in real estate across all asset classes and spectrums in India, which is on a long-term structural upcycle. With increasingly growing concepts and themes, Indian real estate investment has become more diversified throughout the years. According to Piyush Gupta, Managing Director, of Capital Markets & Investment Services at Colliers India, India’s appeal to manufacturers, occupiers, and investors in the Asian market is steadily increasing.
Global and APAC investors view the Indian real estate market as now offering excellent pricing, superior valuations, and greater yields. Indian cities offer greater yields than other cities in the region at relatively cheaper price points, making them a preferred investment location in the APAC region.
In terms of commercial yield across the APAC area, major Indian cities Bengaluru and Mumbai are ranked second and third, respectively. Mumbai leads in the yield of industrial assets, while Bengaluru leads in the yield of offices in the region. The bond yield is also likely to stay range-bound as a result of the Indian central bank stopping its recent rate hikes.
Real estate will likely become a more appealing investment for investors due to the anticipated reversal in the interest cycle over the upcoming several quarters, which will likely result in a wider yield differential between bonds and real estate.
