Indian real estate: Foreign institutional investors dominate Indian investment
Indian real estate: Amid global economic challenges, the sector’s resilience shone as foreign institutional Indian investment dominated institutional investments rose to $4.8 billion across 40 deals in the first half of 2024 (January-June). According to a new assessment, this already represents 81% of the total investments in 2023, which stood at $5.8 billion. Investors’ confidence in India remains unwavering amid global uncertainties and election season, exemplified by the country’s strong economic growth story, real estate consultancy JLL said in a report. While the first quarter of 2024 (January-March) saw a slight decline in investment volumes, the next quarter saw robust investment activity. Additionally, the first half of 2024 saw almost double the number of deals compared to the same period last year, with an average deal size of $113 million. Foreign institutional investors (FIIs) dominate Indian investments at $3.1 billion, representing 65% of total investments in the first half of 2024.
In 2023, domestic investors accounted for 37% of investments, while the average over the past five years was 19%. This trend will continue in the first half of 2024, where domestic investors represent a 35% share. Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL, said, “The Indian real estate market has witnessed a significant revival in the residential sector, indicating a shift in investor preferences towards this class of assets. With a total of 25 deals worth $1.6 billion, residential investments surpassed the office sector by 25% in terms of transaction volume. Interestingly, domestic investors showed a greater inclination towards residential properties, while foreign investors continued to favour the office and warehouse sector.’
The office sector, which was historically the preferred investment asset class among institutional investors, saw a decline in investments in the first half of 2024 compared to the previous year.
Storage
The storage sector led the pack with a 34% share in investments, followed by the residential sector with a 33% share. However, it is important to note that the growth in investments in the storage sector was primarily driven by a single deal, which accounted for over 92% of the total transaction volume in the storage sector in the first half of 2024.
Although this growth was not broad-based, it underscores the growing interest in the warehousing sector and the investment potential in India.
Latha Pillai, Senior Managing Director – Capital Markets, India, JLL, said: “Amid global economic challenges, India’s resilient economy and optimistic outlook are generating significant investor interest. “It is interesting to note that the contribution of domestic institutional investors is on the rise with a share of 37% in 2023, compared to an average of 19% in the last five years.”
“Although uncertainties and monetary tightening in developed countries pose risks, we believe in the long-term strength of the Indian real estate market. India’s continued position as the fastest-growing country reinforces our belief in its market potential,” Pillai said.
Residential Area
The residential sector achieved an unprecedented half-year inflow of $1.6 billion and this can be attributed to regulatory reforms and improved transparency in the sector over the last 5-7 years. Investments in the sector were primarily tilted towards debt, as 68% of the deals were structured loans.
Further, 57% of capital inflows into the residential sector came from the country This is achieved through funds based in the US, which suggests that foreign funds have a clear preference for investing in the office sector.
As the market matures, more investments are expected in emerging sectors. They will focus on sectors such as data centres, life sciences, student housing and healthcare. This diversification will open up new opportunities for investors and further strengthen the Indian real estate market.
Looking at the future
India’s economy is consistently showing resilience and there is a positive outlook for the real estate sector, which is attracting investors interested in the country’s growth story.
