Investment in Indian real estate is booming! In the last quarter (April-June 2024), a record $2.5 billion was invested, the most in three years, and big cities like Bangalore and Delhi are attracting a lot of investment, especially in offices and homes. Warehouses and factories (industrial & warehousing) are the hottest property, attracting over half of the money this year, shows an analysis by Colliers India, a real estate consulting firm.
This momentum in the second quarter of 2024 (Q2) marks a sharp acceleration compared to the steady start observed in Q1 2024.
Industrial and Warehousing takes centre stage:
*Note: Alternate assets include data centres, life sciences, senior housing, holiday homes, student housing, schools etc
Residential market also heats up
The residential segment also saw a remarkable increase in investment, jumping a staggering 7.5 times compared to Q2 2023. This surge in investment suggests growing investor confidence in the residential market and potentially reflects a perception of homes as a secure investment option.
Office sees mixed signals
While the overall investment picture is rosy, the office segment presents a mixed bag. Compared to the previous year, investment activity in office spaces witnessed a significant decline of 83%. However, there is still some ongoing investment, suggesting a potential stabilization or even a gradual rebound in the coming quarters.
Foreign investors lead the charge
Interestingly, a dominant share (81%) of the total investment comes from foreign investors, with a significant portion originating from the US and UAE. This strong foreign investment reflects growing global confidence in the Indian economy and its real estate sector.
“The residential segment also witnessed significant rise in quarterly inflows, 7.5X times compared to Q2 2023, capturing a 21% share of total institutional inflows into Indian real estate. In contrast, with USD 0.3 billion of investments in office assets, the segment witnessed subdued activity in Q2 2024. Although the annual decline was significant at 83%, the QoQ drop was relatively modest at 41%. The surge in industrial & warehousing, and residential investments resulted in a healthy investment volume of USD 3.5 billion for H1 2024 at an overall level, making up for the slow start in first quarter,”said Colliers in a note.
Quarterly investments in Industrial & warehousing segment surged to 11X times
During Q2 2024, the institutional investments in industrial & warehousing segment rose manifold, 11X times compared to Q2 2023 led by select large deals in the segment. With healthy demand momentum, global as well domestic investors are going to play a prominent role in consolidation of industrial & warehousing assets in the country, added Colliers. Amidst significant spurt in E-commerce and retail consumption in India, various asset-level investors are likely to enter the market, boosting the demand for AI enabled warehouses and micro-fulfilment centers in the upcoming quarters.
“Driven by foreign investments, the industrial & warehousing segment witnessed about half of the total inflows in the first half of 2024. Interestingly, institutional investments in the segment for H1 2024 is almost twice the inflows in the entirety of 2023. With India’s Manufacturing Purchasing Managers’ (PMI) Index staying close to 60.0 in the last few months, investor confidence in the industrial & warehousing segment is likely to remain strong in throughout 2024. Furthermore, strategic infrastructure projects such as Dedicated Freight Corridors (DFCs) & Bharatmala and robust government policies such as National Logistics Policy, underscore substantial long-term growth opportunities for the industrial & warehousing segment in India,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.
Bengaluru and Delhi NCR together drove about 23% of the quarterly inflows
While at 72% share, multi-city deals continued to drive majority of the investment inflows during Q2 2024, Bengaluru and Delhi NCR together corresponded to about 23% of the total inflows during the quarter driven by foreign investments. About 56% of the quarterly inflows in Bengaluru were directed towards residential assets, followed by the office segment. Investments in the office segment were particularly strong in Delhi-NCR. Led by inflows into the office segment, Delhi NCR witnessed about 86% YoY rise in investment inflows during Q2 2024.