Institutional Investment in Indian Real Estate Hits $2.5 Billion in Q2, Reaching 3-Year High

India IPO

Updated July 03, 2024

Private equity investments in Indian real estate hit a three-year high in Q2 2024, totaling $2.5 billion. The industrial and warehousing segment led with 61% of the total investments ($1.5 billion), driven by large deals.

Institutional Investment in Indian Real Estate Hits $2.5 Billion in Q2, Reaching 3-Year High

Private equity investments in Indian real estate have peaked at $2.5 billion in Q2, the highest in three years, according to a Colliers report. The industrial and warehousing segment led with 61% of the investments, amounting to $1.5 billion.

The residential segment also saw a significant increase, capturing 21% of the total institutional inflows, a 7.5 times rise from Q2 2023. However, office assets experienced a downturn with an 83% annual decline and a 41% quarterly drop.

“The surge in residential property demand has prompted developers to acquire more land, attracting more capital. Conversely, investments in office spaces have decreased due to the saturation of high-quality assets being held by strong investors.

We anticipate more funds flowing into the residential sector for land acquisition in the upcoming quarters,” said Vikas Chimakurthy, CEO of Kotak Realty Fund.

Foreign investments, mainly from the US and UAE, led the quarter with 81% participation, involving investors like Maple Tree, ADIA, GIC, and Xander.

“With foreign investments dominating, positive sentiment is expected to continue throughout the year. The growth in FDI and domestic capital in Indian real estate highlights the sector's attractiveness and positive long-term outlook.

Domestic institutional and retail investor activity is also expected to remain robust in the second half of the year,” stated Piyush Gupta, Managing Director of Capital Markets & Investment Services at Colliers India.

Institutional investments in the industrial and warehousing segment surged 11 times compared to Q2 2023, driven by large deals. Improved investor confidence has been noted due to the demand for high-quality Grade A supply and evolving supply-chain models.

“We have seen increased investor interest in acquiring and developing high-quality industrial and warehousing assets. Our current fund is expected to add about 20 million square feet to our portfolio over the next 2-3 years,” said Rajesh Jaggi, Vice Chairman - Real Estate, The Everstone Group.

IndoSpace, the group's industrial and logistics real estate platform, manages over $3 billion in assets in India.

With India’s Manufacturing Purchasing Managers' Index (PMI) near 60.0, investor confidence in the industrial and warehousing segment is expected to remain strong in 2024. Strategic infrastructure projects and robust government policies further highlight growth opportunities in this sector.

In Q2 2024, multi-city deals accounted for 72% of investment inflows. Bengaluru and Delhi NCR attracted 23% of the total inflows, mainly from foreign investments.

In Bengaluru, 56% of the inflows went to residential assets, followed by office spaces. Delhi-NCR saw an 86% year-over-year increase in investment inflows.

The Indian real estate sector is likely to see a more diversified capital base with increased domestic institutional and retail investor participation. Despite global economic challenges, international investment in Indian real estate is expected to remain strong.