Institutional investments in the Indian real estate sector have undergone a significant shift in the third quarter of 2023, according to Vestian, an occupier-focused workplace solutions firm. Domestic investors have taken the lead, accounting for 71% of total institutional investments, while foreign investors’ share has dropped from 55% in Q3 2022 to 27% in Q3 2023.
The overall institutional inflow during the July-September period has seen a decrease of 57% compared to the previous quarter. This decline is primarily attributed to a significant drop in foreign fund inflow.
Residential assets, on the other hand, have seen an increase in institutional investments, reaching $298.3 million in Q3 2023. This marks a 71% surge compared to the previous year when institutional investments in residential assets were at $174.3 million.
Overall, the Indian real estate sector has witnessed an uptick in institutional investments in Q3 2023, reaching a total of $679.9 million. This represents an 82% growth compared to the corresponding period in the previous year when the inflow was at $374.3 million.
Looking at the quarterly data, there have been notable fluctuations in institutional investments over the past few quarters. In Q3 2022, the institutional investments were at $0.4 billion, which saw an 86% decrease in Q-o-Q change and a 53% decrease in Y-o-Y change. However, in Q4 2022, the investments surged to $1.5 billion, with a Q-o-Q change of 316% and a Y-o-Y change of 103%. In Q1 2023, the investments decreased to $1.2 billion, with a Q-o-Q change of -19% and a Y-o-Y change of -9%. In Q2 2023, the investments increased to $1.6 billion, with a Q-o-Q change of 28% and a Y-o-Y change of -41%. Finally, in Q3 2023, the investments went down to $0.7 billion, with a Q-o-Q change of -57% and a Y-o-Y change of 84%.
Shrinivas Rao, CEO of Vestian, stated that institutional investments have slowed down in the September quarter due to limited interest from foreign investors amidst a challenging global macroeconomic landscape. However, Rao mentioned that large conglomerates are calling their employees back to the office, which may increase demand for office spaces across the country.
In terms of asset classes, there have been interesting shifts in institutional investments in the third quarter of 2023. The residential sector, although still the leading choice, has seen its share decline from 47% in Q3 2022 to 44% in Q3 2023. On the other hand, the share of commercial assets, including office spaces, co-working facilities, retail properties, and hotels, has decreased from 40% in Q3 2022 to 24% in Q3 2023.
During the July-September period, office assets have attracted $164.1 million in institutional investments, indicating an increase from the $150 million recorded in the same period the previous year.
In contrast, there has been a remarkable uptick in the industrial and warehousing sector, which has surged to 28% in Q3 2023 from a negligible presence in Q3 2022. Vestian attributes this growth to the Government’s ‘Make in India’ campaign and the rising popularity of e-commerce, resulting in increased demand for industrial spaces and warehouses across the country, thus capturing significant interest from large investors.
Overall, the dynamics of institutional investments in the Indian real estate sector are evolving, with domestic investors taking the lead and a shift observed in the allocation of investments across different asset classes.
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