India’s real estate market has emerged as the most preferred destination for global investors in the Asia–Pacific region, making it a lucrative hotspot for investments. According to Colliers’ APAC Trends Investor Outlook 2023, the country has received over $23 billion since 2018, accounting for an impressive 77 per cent of total investments during this period.
Robust Growth Trajectory
Colliers data reveals a remarkable 27 per cent year-on-year increase in institutional investment in real estate during the first nine months of 2023. This surge in deals spans both industrial and residential sectors, and it is closely connected to India’s robust global growth trajectory.
Luxury realtor and social media content creator with over 255k followers on Instagram, Snehil Yadav says, “The preference of India within Asia Pacific growth markets is getting stronger, driven by the strong performance of the economy, improved regulatory framework, and robust demand across multiple real estate sectors.”
Leading Foreign Investors
The United States remains the top investor, contributing approximately 44 per cent of foreign inflows, followed closely by Canada and the Asia-Pacific region, each with a 25 per cent share. Colliers predicts that India will continue to be one of the world’s fastest-growing major global economies, led by private consumption and capital formation.
Diversification Beyond Established Global Markets
As more established markets stabilize, investors are gaining confidence in extending their search for opportunities in growth markets. Piyush Gupta, Managing Director of Capital Markets & Investment Services in India, states, “The opportunities to invest in India continue to spread across office, logistics, private credit, residential, and data centers.”
Confidence in Stable Returns
From the perspective of global and APAC investors, the Indian real estate market currently offers stable returns coupled with attractive pricing, better valuations, and higher yields. Nadar asserts, “Foreign investors are likely to remain bullish on the Indian market over the next few quarters.”
Data Centers: A Capital Magnet
Institutional investors are particularly capitalizing on India’s data center growth, attracted by stable income, higher yields, and a supportive regulatory framework. The report indicates that $1.1 billion has been infused into this sector since 2020, with projections of $10 billion in investments over the next three years alone.
Office Space Dominance
The report highlights that institutional investors in India continue to favor the office sector due to increased opportunities, resilient demand, robust growth prospects, and the availability of exit avenues in the form of Real Estate Investment Trusts (REITs). In 2023, institutional investments in office assets rose 1.6 times on a yearly basis, reaching $2.9 billion and accounting for about 63 per cent of the total inflows for the first nine months of the year.
While global investors dominate funding activities, domestic investors are becoming more active in the market.
The report notes, “We’re also seeing more regional investors and funds beginning to underwrite India as a market and to understand its dynamics as part of a wider investment strategy.”
Positive Outlook for 2024
Colliers anticipates a more positive outlook for 2024, with a surge in pent-up equity looking for a home. The report states, “Particularly within the APAC region, investors are aware of the resilience of the asset class and the growth opportunities offered in rapidly maturing markets such as India and South Korea.”
The Colliers APAC Outlook is based on interviews with senior Colliers experts and a survey of over 900 property investors conducted in October and November 2023, with more than 400 respondents from the Asia-Pacific region. The survey data points to a growing proportion of investors planning to boost real estate allocations, with 75 per cent planning to dedicate 5-20 per cent of assets under management to real estate in the future, up from 64 per cent currently.
ESG Goals in Focus
The report also highlights the rising awareness of Environmental, Social, and Governance (ESG) goals in the real estate sector. Investors in India are formulating strategies aligned with their long-term ESG targets, with a focus on monitoring and reporting environmental impact as part of due diligence and asset management activities.
The office asset class, in particular, has witnessed increased adoption of green certifications, reflecting the demand for sustainable buildings and the willingness of tenants to pay higher rental premiums for environmentally friendly spaces.
Among APAC investors surveyed, 28 per cent reported fully assessing the ESG performance of their assets, compared to just over 20 per cent the previous year.
With India being one of the fastest-growing economies globally, investors are finding attractive opportunities in the real estate sector, backed by stable growth, regulatory improvements, and diverse investment avenues. As the nation continues to assert its position as a global investment hub, the real estate market remains a key driver of economic prosperity and international investor interest.