Equity inflows in Indian real estate market touched $8.9b in 9 months

V Nagarajan

Investment activity in India’s real estate market scaled a new peak in the first nine months of 2024 due to a resurgence in capital deployment in the July to September quarter.

Equity capital inflows touched $8.9 billion between January and September, registering a 46 per cent Y-o-Y growth.

The strong momentum in deal volume continued, with about 200 deals reported during this period, compared to 151 deals in the same period last year.

The average deal size also increased to nearly $45 million in the first nine months of 2024 from about $36 million in 2023. Mid-sized deals, ranging between $10-50 million, represented 56 per cent of the total investment inflows during this period, says a survey by CBRE.

The office sector witnessed a resurgence of inflows during January-September 2024, with a nearly 50 per cent Y-o-Y growth. Land/development sites and the office sector cumulatively attracted more than 70 per cent of the investment flows during this period. Residential, retail, and mixed-use sectors also experienced a significant rebound in capital inflows, capturing a healthy share of the overall capital inflows in the first nine months of 2024. Nearly 64 per cent of the capital inflows in the land / development sites went into residential developments.

Institutional and domestic investors drive capital inflows Institutional and collective vehicle investors continued to be a major source of capital deployment in the Indian real estate sector, accounting for nearly 40 per cent of the overall investments from January to September.

Developer companies led the total capital inflows with more than 41 per cent share in this period. Domestic investors (predominantly developers) invested nearly $6 billion during the first nine months of the year, dominating the overall capital inflows with an almost 65 per cent share. In comparison, foreign investors contributed about $3.1 billion during the same timeframe. Notably, North American and Singaporean investors were the significant contributors, representing approximately 85 per cent of all foreign capital inflows.

Debt financing in the real estate sector soared to a new peak in January-September, surpassing $4.7 billion and marking a more than twofold increase compared to the same period last year.
As institutional investors and foreign capital made a strong comeback, equity inflows reached $8.9 billion in January-September. Land / development sites and the office sector accounted for more than 70 per cent of the equity inflows, while debt financing exceeded $4.7 billion during this period.

Delhi-NCR, Mumbai, and Bengaluru remained the preferred markets from a capital inflows standpoint, with a cumulative share of over 63 per cent. Tier-II and III cities witnessed overall investments of $0.6 billion during this period, while land, retail, and I&L sectors together accounted for more than 90 per cent of the overall investment share.

Investors' interest in alternate sectors such as infrastructure, healthcare, BFSI, and retail & e-commerce resulted in healthy investment numbers in the January-September.
While infrastructure was the most preferred sector, drawing investments worth around $9 billion during the same period; data centres and renewables sectors also witnessed heightened debt investment activity.

Few fractional ownership platforms (FOP) have already started the process of registering as SM REITs. These regulations were introduced against the backdrop of India’s REITs and InvITs5.6 demonstrating sustained growth, cumulatively mobilising Rs1.3 trillion between FY2019-20 and March 2024.

Growth and controlling stake / buyout as an investment strategy was strong between January and September, with robust activity witnessed on the debt funding side as well. Equity-deal volume was nearly 1.5 times compared to the same period last year, with mid-sized deals dominating RE investments. Debt deal volume also doubled compared to the same period the previous year.

Due to a resurgence in investment inflows in built-up office assets and a strong acquisition pipeline for land in the residential sector, CBRE estimates that overall equity investments in 2024 to be in the region of $10 – 11 billion range.

Adopting growth and controlling stake / buyout investment strategies signals the long-term commitment and confidence that investors instill in India’s RE market. Additionally, deal volumes picking pace indicates a wider array of assets gaining access to debt / equity funding.

I am a realtor and planning to serve as a channel partner for Indian developers. How much agency commission can they remit officially to realtors abroad? Manish Wadhwani, Sharjah.

The government permits authorised dealers to freely allow without RBI permission, remittance by way of commission to agents abroad for sale of residential flats or commercial plots in India upto US$25,000 or 5% of the inward remittance, per transaction, whichever is higher.

I have been employed in Gulf for five years now. A foreigner in the same company may go to India for business purposes. Can a foreign national take an apartment on lease while residing in India? Pavan Rishi, Dubai.

Yes. He can take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement of seeking any permission of or reporting to the Reserve Bank of India.