According to a Colliers analysis, “Foreign investments in Indian real estate turn a corner,” produced in collaboration with FICCI, foreign capital flows in real estate increased threefold to $24 billion during the previous five years.
Global investors have become more interested in investing in Indian real estate in the recent five years, thanks to regulatory improvements implemented in 2016.
Foreign investments in Indian real estate increased to 82 percent between 2017 and 2021, up from 37 percent in the previous five years.
“We are observing a buoyancy in global capital inflows in India across asset classes, with office and industrial properties continuing the most favored,” said Piyush Gupta, Managing Director, Colliers India’s Capital Markets and Investment Services. The investors have a long-term perspective and a large exposure to development assets, indicating that they are willing to incur construction risks with reputable partners.
To establish and acquire long-term sustainable properties, the investors continue to invest with developers that have demonstrated experience in their particular business areas. More structured capital is likely to come into the industry, with residential sales continuing to do well across markets in India and available prospects for developers to grow.”
During the period 2017-21, the office sector led the way in terms of foreign investments, accounting for 43% of total foreign investments, followed by the mixed-use industry, which accounted for 18% of total foreign investments.
Following legislative improvements in 2016, the office sector saw a considerable increase in foreign capital flows, owing to increased transparency, strong demand for Grade A office space, and exit options such as REITs. Except in 2021, when foreign investments in the office sector nearly fell, foreign investments in the office sector were regularly above 2.0 billion in 2017.
The Industrial and Logistics sector, which has surpassed the residential sector in terms of investment, is ranked third. Following the NBFC crisis and low residential sales, foreign investors remained wary of the residential sector.
Residential assets accounted for 11% of total foreign investments in 2017-2021, down from 37% in the previous five-year period.
“As investors explore new paths for growth and profitability, demand for alternative assets like as life science labs, data centers, and flex spaces has surged throughout the pandemic.” In the last five years, data centers have accounted for a total of 52 percent of foreign investments in alternative ventures.
Investors will be pushed to build new platforms for development prospects due to a lack of income-producing data center properties in key regions and the potential for future REIT listings. Global data center operators, corporations, and investors have committed $ 13.5 billion in capital to the development of data centers in India over the last five years,” says Vimal Nadar, Senior Director, Research, Colliers India.
Industrial and logistics assets in India have only recently gained traction, owing to the strong demand for modern warehousing facilities from E-commerce and 3PL companies. Industrial and logistics assets surpassed the office sector as the main choice for foreign institutional investors in 2021, attracting over a third of foreign investments (USD1.1 billion).
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