India’s real estate sector showed its resilience amid the global economic challenges in 2023, attracting over $5.8 billion of institutional investments across 53 deals, a 14% increase from 2022, according to a report by JLL India. The report, titled ‘Investing in Tomorrow: The Real Estate Journey of 2023’, predicts that the investor confidence in the Indian growth story will remain strong in 2024 as well.
The report highlights the following trends and insights about the real estate sector in India in 2023:
- Foreign institutional investors were the largest contributors, accounting for 63% of the total investments, followed by domestic domiciled investors with 37%. The latter saw a significant rise from an average of 19% in the previous five years.
- Equity dominated the investment mode, with 81% share of the total investments, indicating a preference for long-term capital appreciation over short-term income generation.
- Non-core assets, such as warehousing, data centres, student housing, etc., led the transaction volumes, with 53% share of the overall volumes, reflecting a higher risk appetite and a focus on potentially higher returns by investors.
- The office sector continued to be the favoured sector, with 52% share of the investment pie, followed by residential and warehousing with 16% and 13% respectively. The office sector saw a 61% increase in capital flow, from $1.8 billion in 2022 to $3 billion in 2023, across 15 deals.
The report also anticipates that the office sector will remain the most attractive sector in 2024, driven by the demand for quality and technology-led spaces, especially from the IT/ITeS, BFSI, and e-commerce sectors. The report also expects that newer sectors, such as warehousing, data centres, student housing, etc., will attract a major share of institutional investments in the coming years, as they offer opportunities for diversification, scalability, and higher yields.
Lata Pillai, senior managing director and head of capital markets, JLL India, said, “Inflation and uncertainty about the direction of the global economy did not seem to be a deterrent for institutional investments in India in 2023. Investments continued to cross the 5 billion mark, a trend that has continued since 2018. Multiple rate hikes in the Americas have curbed investment activities from the US and Canada. However, 2023 saw a significant contribution from the APAC region. The prospect for the domestic economy currently remains bright and we are expecting this optimistic trend to continue in CY 2024.”
She added, “While the upcoming elections may cause delays in decision-making, the India growth story will continue to be robust, driven by its inherent strengths and continued focus on economic development.”
The report also notes that 2023 witnessed the announcement of $2.8 billion of platform commitments to be invested over the next few years, a 38% dip from 2022, which had witnessed the highest growth of platform deals, with a 174% increase from 2021. The report attributes this decline to the global economic slowdown, which seems to have affected the investor sentiments for long-term commitments. The largest platform commitment deal in 2023 was between Ivanhoe Cambridge and Mapletree, with an investment capacity of over $1.8 billion, in the space of technology-led offices in India.
Another significant development in the real estate sector in 2023 was the introduction of REITs (Real Estate Investment Trusts) in India, which opened additional avenues for real estate companies and investors to access public markets, offering liquidity and a regulated investment structure. India saw the listing of its first retail REIT, Nexus Select Trust REIT, in 2023, and it received a robust response from anchor investors, with 45% of the IPO size getting absorbed by them.
The report concludes that the real estate sector in India is poised for a strong growth trajectory in 2024, backed by the favourable macroeconomic factors, the increasing demand for quality spaces, the emergence of new asset classes, and the availability of diverse and flexible investment options.