7 in 10 institutional investments come from domestic players in Q3

• The overall institutional inflow during the July-September period decreased by 57% compared to the previous quarter.
  
• In Q3 2023, residential assets saw an increase in institutional investments, reaching $298.3 million.
  
• During the July-September period, office assets attracted $164.1 million in institutional investments.
  

In an interesting development, Q3 2023 has witnessed a shift in the dynamics of institutional investments in the Indian real estate sector. Domestic investors took the lead, accounting for 71% of total institutional investments, while the share of foreign investors declined from 55% in Q3 2022 to 27% in Q3 2023, according to Vestian, an occupier-focused workplace solutions firm.

The overall institutional inflow during the July-September period decreased by 57% compared to the previous quarter. This decline was primarily attributed to a significant drop in foreign fund inflow.

In Q3 2023, residential assets saw an increase in institutional investments, reaching $298.3 million, marking a 71% surge compared to the previous year. In the same period last year, institutional investments in residential assets amounted to $174.3 million.

For the entire Indian real estate sector, the third quarter of 2023 witnessed an uptick in institutional investments, totaling $679.9 million, representing an 82 % growth compared to the corresponding period in the previous year when the inflow stood at $374.3 million.


Source: Vestian Research

Says Shrinivas Rao, CEO, Vestian, “Institutional investments have slowed down during the September quarter due to limited interest from foreign investors amid a challenging global macroeconomic landscape." However, Rao noted that large conglomerates are calling their employees back to the office which may inflate demand for office spaces across the country.

Institutional investments in various asset classes

In the third quarter of this calendar year, institutional investments in various asset classes demonstrated some interesting shifts. The residential sector, despite remaining the leading choice, saw its share decline to 44% in Q3 2023 from 47% a year earlier.

Conversely, the share of commercial assets, encompassing office spaces, co-working facilities, retail properties, and hotels, decreased to 24% in Q3 2023 from 40% in Q3 2022.

During the July-September period, office assets attracted $164.1 million in institutional investments, marking an increase from the $150 million recorded in the same period the previous year.

In contrast, the industrial and warehousing sector experienced a remarkable uptick, surging to 28% in Q3 2023 from a negligible presence in Q3 2022.

According to Vestian, this growth can be attributed to the Government's 'Make in India' campaign and the burgeoning popularity of e-commerce, which fueled heightened demand for industrial spaces and warehouses across the country, consequently drawing significant interest from large investors.