Real estate investment in India is booming. A record $2.5 billion was invested in the last quarter (April-June 2024), the highest in the past three years. Big cities such as Bangalore and Delhi are attracting a lot of investment, especially in offices and residential properties. Warehouses and factories (industrial and storage) are the most popular properties, attracting more than half of the funds this year, according to an analysis by real estate consultancy Colliers India.
This momentum in the second quarter (Q2) of 2024 marks a sharp acceleration compared to the steady start observed in 1Q24.
Click here to connect with us on WhatsApp
Industry and warehousing are the focus:
*Note: Alternative assets include data centers, life sciences, senior housing, vacation homes, student housing, schools, etc.
The housing market is also booming
The residential sector also saw a notable increase in investment, jumping an astounding 7.5 times compared to the second quarter of 2023. This surge in investment indicates growing investor confidence in the housing market and may reflect the perception that housing is a safe investment option.
Offices see mixed signals
While the investment picture is generally positive, the office sector is a mixed bag: investment activity in office space fell a significant 83% compared to last year, but investment is still continuing, suggesting a stabilization or gradual recovery may be on the way in the coming quarters.
Foreign investors take the lead
Interestingly, a majority (81%) of the total investments came from foreign investors, mostly from the US and the UAE. This strong foreign investment reflects growing global confidence in the Indian economy and real estate sector.
“The residential sector also saw a strong increase in quarterly inflows, up 7.5 times compared to Q2 2023, accounting for 21% of total institutional inflows into Indian real estate. In contrast, office assets saw subdued activity in Q2 2024, with investment volume of $300 million. The annual decline was significant at 83%, but the quarter-on-quarter decline was relatively modest at 41%. Surge in industrial/warehouse and residential investment led to a healthy overall investment volume of $3.5 billion in the first half of 2024, making up for a slow start in the first quarter,” Colliers said in a note.
Quarterly investment in industrial and warehousing sector surges 11-fold
In Q2 2024, institutional investment in the industrial and warehousing sector grew by multiples, 11 times compared to Q2 2023, driven by select large transactions in the sector. Healthy demand momentum will see domestic and international investors play a key role in consolidating industrial and warehousing assets in India, Colliers added. India is witnessing a significant surge in e-commerce and retail consumption, which is likely to see investors at various asset levels enter the market, boosting demand for AI-enabled warehouses and micro-fulfillment centers in the coming quarters.
“Led by foreign investment, the industrial and warehousing sector accounted for around half of the total inflows in the first half of 2024. Interestingly, institutional investment in the sector in the first half of 2024 is almost double the inflows in the entirety of 2023. With India’s manufacturing Purchasing Managers’ Index (PMI) remaining close to 60.0 in recent months, investor confidence in the industrial and warehousing sector is likely to remain strong throughout 2024. Moreover, strategic infrastructure projects such as Dedicated Freight Corridors (DFCs) and Bharatmala, as well as strong government policies such as the National Logistics Policy, highlight the significant growth opportunities for the industrial and warehousing sector in India over the long term,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.
Bengaluru and the National Capital Region of Delhi together accounted for around 23% of the quarterly inflows.
Multi-city transactions continued to dominate, accounting for 72% of investment inflows in Q2’24, with Bengaluru and NCR Delhi together accounting for around 23% of total quarterly foreign investment inflows. Around 56% of Bengaluru’s quarterly inflows were towards residential assets, followed by the office sector. Investment in the office sector was particularly strong in NCR Delhi. Driven by inflows into the office sector, NCR Delhi saw investment inflows increase around 86% year-on-year in Q2’24.
