Foreign investors infuse $4 bn annually into Indian real estate sector

Foreign investors have invested an average of $4 billion annually over the past five years into India's real estate sector, according to a report by property consulting firm Colliers. This influx is attributed to India's economic resilience, favourable investment climate, and rapid urbanisation, making it an increasingly attractive investment destination for global funds.

Colliers in its report says that with the IMF projecting a GDP growth rate of 5.7% in 2024, India remains one of the fastest-growing economies globally and is highly favoured among emerging countries in the Asia-Pacific (APAC) region due to its appealing pricing, better valuations, and higher yields.

In 2023, foreign inflows experienced a notable rebound, increasing by 20% year-on-year (YoY) to reach $3.6 billion. These investments were not limited to traditional avenues but also extended to alternative asset classes, thereby supporting robust domestic growth in office, residential, and industrial segments, the Colliers report says.

Looking ahead, Colliers predicts that investor interest will remain strong, with new funds seeking entry into the Indian market. While there is a continued preference for income-yielding office assets, residential, industrial, and alternative sectors are expected to attract renewed interest.

Anticipating a more dynamic year for the Asia Pacific real estate markets in 2024, Chris Pilgrim, managing director of global capital markets, APAC at Colliers, says, "2024 is anticipated to be a more dynamic year for the both the Asia Pacific real estate markets as well as capital in the region remaining the dominant investor in global real estate. The ability to act quickly, dig deeply into markets and sectors to identify value, and forge productive partnerships will be key to making the most of the region’s diversity and increased opportunity."

Although the U.S. and Canada remain major sources of capital, leading APAC countries such as Singapore, Hong Kong, South Korea, and Japan are also showing growing interest in India's real estate market. In 2023, investment inflows from the APAC region surged by 57% YoY to $1.8 billion, with 70% of these investments directed towards office assets. Additionally, APAC countries are increasingly investing in residential, industrial, and warehousing assets, it reports.

"Looking ahead to 2024, investors are expected to increase their activity in India's real estate market, driven by a robust economic performance, positive business environment and robust demand across core and alternative sectors. Anticipation of heightened activity in a way reflects certainty around the policy environment, narrowing gap between buyers and sellers and investor intent to deploy more capital across real estate asset classes," the report adds.

"In 2023, a striking 90% of investment inflows into India's office sector originated from foreign investors, demonstrating strength of the underlying asset class. This marks a transformative period for the industry. Furthermore, as sustainability gains further prominence in investment decisions, the real estate sector including office market of India is set to align seamlessly with global Environmental, Social, and Governance (ESG) standards," Vimal Nadar, senior director and head of Research at Colliers India says.