Investments in Indian real estate sector remains steady this year

V Nagarajan

Investments in Indian real estate sector has remained steady during this year and the capital inflows were led by development sites/land and built offices, industrial and logistics and residential sector.

It is anticipated that investment flows in real estate would remain steady over the next two years, with about $16 - 17 billion of cumulative inflows expected during this period. Delhi-NCR, Bangalore and Mumbai are expected to retain pole position during the year, according to CBRE.

Institutional investment inflows for the full year are set to comfortably surpass 2022 levels of $4.9 billion; it has already reached 93 per cent of the last year’s volume in the first three quarters of 2023.

Core and core-plus assets would continue to be preferred by major foreign investors in 2023. Greater activity via the opportunistic route amid the limited availability of investment-grade assets that are up for sale is also expected. If the past trend is any indication, then it is expected that the office sector will continue garnering a majority share of the total institutional inflows, followed by the industrial and logistics sector and site / land parcels.

On the office front, gross absorption is anticipated to be around 50 million sq. ft, for this year at par or better than the historic performance of the previous year. Flex spaces will further solidify their presence in occupiers’ portfolio, contributing almost one-fifth of the office space demand in the country, according to Colliers. Residential real estate activity is all set to outperform last year, which witnessed decadal high sales across the major cities of the country. Both sales and launches in 2023, until the third quarter, have come close to 2022 levels. Considering the festive boost in Q4, the year 2023 is likely to witness 20-30 per cent higher sales as compared to 2022.

Driven by government initiatives, increased institutionalisation, persistent investor interest and an upswing in demand from 3PL and E-commerce players, the past few years can be envisaged as an accelerated growth phase for the industrial & warehousing sector of the country. Third-party logistics players (3PLs) continued to be the top occupiers of warehousing space, contributing to about 40 per cent share in total industrial & warehousing demand. Leasing momentum is expected to continue in the final quarter of this year led by 3PL, engineering and FMCG players and is likely to close in the range of 22-25 million sq ft. On the data centre front, during the first half of 2023, an additional 57 MW was added,

representing a 34% decrease compared to the same period last year. Consequently, the industry experienced low vacancy levels of 6.7% due to reduced supply additions.

Looking forward, data centre will project robust growth with an estimated increase of 693 MW from the second half of 2023 to 2026. This growth will necessitate an additional 8.8 million sq. ft of real estate and fresh investments of $4.4 billion, says JLL. According to Colliers survey, the year 2024 definitely looks more positive and might see increased investor activity amidst a robust economic environment and positive play of market indicators.

With global investors partnering with local developers, there is ample dry powder to be invested in the Indian real estate market, especially in office and industrial sectors which is likely to be deployed in a phased manner in the short term.

Within APAC, India is expected to remain the most preferred emerging region owing to its fast-paced growth trajectory, attractive pricing, better valuations, and higher yields. Global as well as domestic investors will continue to allocate funds in various markets and asset classes while keeping their core focus towards office assets.

I am holding two apartments along with my wife and we wish to invest in a larger unit by disposing both the units. What are the tax implications? Please clarify. Amit Kak, Sharjah.

It is presumed that you and your wife are the co-owners of both the properties and both of you have contributed funds for acquisition of the said properties. You and your wife will be liable to pay long-term capital gains tax on transfer of your rights if the said properties are held by you for a period of two years or more.

The liability for payment of long-term capital gains tax will depend upon the ratio of holding in both the properties. Both of you can avail the deduction under Section 54 if you reinvest the capital gains amount accruing to on sale of both the properties, in purchase of a new residential property complying with the conditions stipulated under Section 54.

I wish to gift my immovable property in India to my relative. Is registration of gift deed compulsory? Is it taxable? Please clarify. Santosh Rane, Dubai.

Yes. Registration of a gift deed with the sub-registrar of assurances is mandatory.

To gift your immovable property to your relative in India, you will have to draft the document on a stamp paper, have it attested by two witnesses and register it.