Institutions shy away from real estate investments which dip by 40% in Q4 of FY24

• Domestic institutions’ share in institutional investments in Jan-March inflows more than doubled to 45%.
• Office sector continues to receive a lion’s share of investments – at $600 million.
• Industrial & warehousing segment saw inflows to the tune of $200 million
  

Even as Indians’ love for buying homes refuses to die down, institutions seem to have a contra view of the real estate sector. In the Jan-March quarter, institutions poured $1 billion into the sector — which is a 40% drop as compared to the same quarter last year, says a report by Colliers.

Domestic institutions have been at the forefront, and made up for 45% of the total inflows in the recently concluded March quarter. Their share more than doubled in the last year as it was at 24% in Jan-March 2023.

“Domestic investors are increasingly gaining more ground in Indian real estate. Within domestic institutional investments, office and residential assets formed about 66%, reflecting a strategic approach to align with India's growth trends. This also underscores growing confidence of a diversified spectrum of investors across multiple investment strategies including credit and acquisitions,” said Piyush Gupta, managing director, capital markets & investment services at Colliers India.

Institutional inflows into real estate sector

Asset class	Jan-March 2024	Jan-March 2023	YoY change
Office	$563 mn	$907.6 mn	-38%
Residential	$102.6 mn	$361 mn	-72%
Alternate assets	$21 mn	$158 mn	-87%
Industrial & Warehousing	$177.7 mn	$216 mn	-18%
Mixed use	$130.8 mn	$15 mn	766%

Source: Colliers

Tech-cities rule office investments

Office sector continues to receive a lion’s share of investments – at $600 million. Within this segment, two cities — Bengaluru and Hyderabad lead investments, with an 81% of share.

This trend mirrors robust office demand seen in these cities this quarter. These cities have been frontrunners for demand for Grade A office space in the quarter and saw more than half of the India leasing activity. Overall office demand across the top six cities also remained robust, at 13.6 million sq ft, marking a remarkable 35% increase compared to the same period last year.

“Foreign investments remained predominant, driving over two-thirds of the sector's inflows, reinforcing the confidence of global funds in the fundamentals of commercial office real estate in India. Institutional investors continued their preference for completed and pre-leased income-yielding office assets as compared to greenfield developments,” says Colliers.

Industrial & warehousing as well as residential segments also drew inflows to the tune of $200 million and $100 million respectively. Investments in Industrial and warehousing assets were concentrated around Pune, Chennai, and Delhi-NCR.

“As the industrial and warehousing segment evolves, and micro-fulfillment centers, dark stores and AI-driven supply chains become more prevalent, consolidation and institutionalization will pick up pace, further driving global capital in the coming years,” says Colliers.

In the March quarter, the APAC region contributed to over 82% of foreign inflows in India's real estate sector.

“The surge in investments by APAC countries such as Singapore can be attributed to a combination of factors including favourable investment climate, strong demand fundamentals across core & non-core segments within real estate, and strategic alliances in the form joint venture platforms,” said Vimal Nadar, senior director and head of research, Colliers India.