Realty sector secures $5.4 billion institutional inflows in 2023: Report

With a 10% annual growth to $5.4 billion, the Indian real estate industry in 2023 saw the highest institutional inflows since 2020, a new report by property consultancy Colliers revealed on Monday. In 2019, institutional funding into the sector stood at $6.3 billion.

This is indicative of India’s resilience amid a complex macroeconomic landscape negatively impacting realty markets across the globe. “Investors continue to view India favourably, owing to strong economic performance, improved regulatory framework and sustained demand across various real estate segments,” the report noted.   

Led by Canada and Singapore, foreign investments accounted for 67% of total institutional funding during the 2023 calendar. However, funding from the US - traditionally a strong backer - witnessed a drop during the year, compared to its contribution in 2020. Remarkably, investment inflows from the Asia Pacific have been on the rise, jumping to 3.6 times of 2020 levels in 2023. 

Sectorally, the office market emerged as the crowd puller amongst both domestic and global investors, bagging a 56% share in total inflows during the year. Meanwhile, the residential segment and emerging asset classes such as data centres, student housing and schools gained traction amongst investors at home, who showed an impressive 66% year-on-year growth to account for 32% of total inflows during the year.

The industrial & warehousing segment saw a two-fold rise - with investments to the tune of $0.9 billion - marking the highest increase across all segments in 2023.

“As the sector evolves, we are likely to witness increased consolidation as well as institutionalisation in the sector,” the report estimated, adding that foreign funding into the sector is expected to rise multi-fold in the next few years.

While overall investment inflows during the year remained sturdy, the last quarter of CY23 saw a moderation with a 37% year-on-year decline at $0.8 billion. “The dip is a short-term blip and it doesn't affect the annual investment trend or the long term view,” assured Vimal Nadar, Senior Director and Head of Research, Colliers India.

The fourth quarter of the calendar however reflected a rebound in institutional investments into alternate asset classes, wherein student housing secured a lion’s share of the pie at 60%.

“Looking ahead to 2024, investment activity is likely to remain unabated backed by robust domestic economic fundamentals, while a strategic integration of technology and ESG will play out in investment decisions," said Piyush Gupta, Managing Director (Capital Markets & Investment Services), Colliers India.