Institutional investments in Indian realty maintained steady momentum

V Nagarajan

Institutional investments in Indian real estate sector maintained a steady momentum at $5.4 billion, rising 10 per cent YoY during 2023.  The year witnessed the highest levels of investment inflows since 2020 showcasing India’s resilience despite uncertainties in global markets otherwise, according to Colliers India survey. While foreign investments retained their dominance, forming 67 per cent of the total inflows for the year, domestic investments also registered an impressive 66 per cent annual increase at $1.7 billion.

Office sector continued to be the largest contributor in real estate investments for 2023 with 56 per cent share in total inflows, attracting both global as well as domestic capital.

While the overall investment inflows during the year remained sturdy, the last quarter of the year saw moderation at $0.8 billion, Q4 registered a 37 per cent YoY drop in investments.

Alternatives, meanwhile, had a 51 per cent share in total inflows during Q4 of 2023, indicating strong demand in segments including data centres, student housing, life sciences, schools, etc.

While key global investment markets faced downside risks, India maintained its status being amongst the fastest-growing economies keeping investor confidence intact. While inflows from the US have witnessed a drop in 2023 as compared to 2020 levels, Canada and Singapore are increasingly establishing themselves as leading source of foreign capital in Indian real estate. These two countries accounted for 78 per cent of the global real estate inflows into India during last year.

Investment inflows from APAC countries have been rising every year and in fact surged to 3.6x times in 2023, when compared to 2020. Investors continue to view India favourably, owing to strong economic performance, improved regulatory framework, and sustained demand across various real estate segments.

According to Piyush Gupta, MD, Capital Markets & Investments at Colliers India, institutional investments in Indian real estate are more broad-based, with significant investments coming into education, shared spaces, and data centres, adding to a strong domestic upcycle in office, residential, and industrial areas.

“Investors from the APAC region have been showing an increasing appetite for Indian real estate, contributing to about half of the total foreign inflows during 2023. Looking ahead to 2024, investment activity is likely to remain unabated backed by robust domestic economic fundamentals, while a strategic integration of technology and ESG will play out in investment decisions,” said Gupta.

Domestic investors have emerged as active contributors, covering 32 per cent of the total real estate investments in 2023, when compared to 22 per cent share in 2022. While office market continues to be the frontrunner backed by investments from global players, domestic investors are focusing more on alternative and residential assets.

Office sector continues to be the frontrunner and investments in alternatives rebound significantly At $3.0 billion, investment inflows in the office sector rose 53 per cent YoY during 2023, led by select large deals.

“Office led investments had a commanding 56 per cent share in total real estate inflows in 2023. Along with envisaged momentum in alternative assets, industrial & warehousing, and residential sectors in the next few quarters, office sector will continue to dictate India’s real estate investment ecosystem,” said Vimal Nadar, senior director and Head of Research, Colliers India.

Industrial & warehousing segment saw a noteworthy two-fold rise with about US$0.9 billion inflows, marking the highest increase across all segments in 2023. This exceptional growth is credited to the sustained expansion of industrial sector, thriving on heightened consumption levels.

After witnessing subdued activity in the first three quarters, investments in alternatives rebounded in the last quarter, taking the overall inflows in alternatives to $650 million for the year. Q4 of 2023 accounted for 65 per cent of the total investments in alternatives in 2023. Student housing accounted for about 60 per cent of the investment inflows within alternatives during the year.

I have been living in the Gulf for three years. I intend disposing residential and commercial assets in India. Can I claim exemption from capital gains? Please clarify. Madhav, Sharjah.

Yes. There are several options. You can invest in another residential house or invest in specified bonds or invest in units of a specified fund or invest in a start-up company.

I have inherited ancestral property in India. Can I gift to my relative? Are there restrictions? Kindly advice. Pranam Sudhir, Dubai.

If it is ancestral property, heirs get the right by birth, depending on the religion they belong to in India. The property can be passed on by reorganisation, by way of family settlement or a division in case of a HUF (Hindu Undivided Family). If you want to gift your share from ancestral property, you can do it without any restrictions as it is like your self-earned property.