Institutional investment: Commercial assets account for 60% of institutional investment, according to new report

Institutional investment in Indian real estate saw an inflow of $3.4 billion in the first nine months of 2022, according to a report by Vestian, in association with FICCI.

While commercial assets remain investors’ favorite asset class, accounting for 60% of total investment share in 2022 (Jan-Sept), residential assets are experiencing a resurgence – their share rising to 27% in 2022 vs. only 4% in 2020

“Nearly 14 million square feet of absorption would be recorded from January to December of this year. The rebound from April 2023 will be very strong as supply is extremely tight, rentals firm up and access to capital is limited,” said Sanjay Dutt, Co-Chair of FICCI’s Property Committee and Managing Director and CEO of Tata Realty & Infrastructure. ltd.

The share of foreign funds has consistently eclipsed India-dedicated funds in total investment. In the first nine months of 2022, foreign funds accounted for 89% of commercial assets and 58% of residential assets, of total real estate investment

“The country’s real estate sector has shown considerable resilience. The continued traction of institutional investment in the sector over the year is a testament to investor confidence despite economic constraints, inflationary pressure and the lingering pandemic impacting the business environment,” said Shrinivas Rao, FRICS, CEO of Vestian.

“We believe that with the government striving to increase the ease of doing business, the growth of the IT sector and the immense prospects held by alternative assets, institutional investment in real estate will emerge stronger in the coming period,” Rao said.

The retail sector has gradually regained ground – from a minimum share of 8% in total investment in retail assets in 2021, retail investment increased to 14% in 2022, which is bodes well for the segment.

The coworking spaces segment also harbors good investment opportunities, after a brief period of uncertainty that clouded its growth prospects in 2020; its share in total absorption has increased from 10% in 2018 to almost 18% in 2022 (YTD).

Investments have grown in warehousing and logistics, driven primarily by e-commerce entities and their growing need for last-mile delivery. Substantial investments are also gradually moving into alternative asset classes, including data centers and life science R&D centers.