Institutional funding into real estate declines 40% YoY in Q1 2024: Report

Hyderabad and Pune collectively accounted for over 50% of the total institutional inflows during the first quarter of 2024, a majority of which was channeled into the office and industrial & warehousing segments. That apart, over 82% of the total investments emerged from the Asia Pacific region.

Bengaluru: In the absence of a significant number of big-ticket deals, institutional funding into the Indian real estate market declined 40% year-on-year to around $1 billion during the first quarter of calendar 2024, according to a new report released by property consultancy Colliers on Tuesday. However, sequentially, the quarter’s inflows in the category registered a 21 per cent rise, the report said.

This follows a report by real estate consultant Cushman & Wakefield last week, which revealed a 15 per cent year-on-year dip in fresh housing supply across the top 8 markets in the country during the January-March period under review. 

Industry stakeholders, however, do not see the declining pattern as an alarming trend yet and echoed that it could be premature to draw conclusions before the second quarter numbers come in. 

Hyderabad and Pune collectively accounted for over 50 per cent of the total institutional inflows during the first quarter of 2024, a majority of which was channeled into the office and industrial & warehousing segments. That apart, over 82 per cent of the total investments emerged from the Asia Pacific region. 

“The surge in investments by APAC countries such as Singapore can be attributed to a combination of factors including favorable investment climate, strong demand fundamentals across core and non-core segments within real estate, and strategic alliances in the form (of) joint venture platforms,” said Vimal Nadar, who heads research at Colliers.

The overall contribution was split 9:11 between domestic and foreign investors during the period under review. The share of domestic investors, which saw a 15 per cent year-on-year uptick in the first quarter with $400 million, has been on the rise in recent years, owing to a host of factors.

“This notable increase underscores the growing confidence among domestic investors, buoyed by favorable policy reforms, improving economic conditions and a burgeoning demand for real estate assets nationwide,” Nadar said.

At $600 million, the office sector accounted for 57 per cent of the total investment inflows during the first quarter. Furthermore, institutional investments in industrial-warehousing and residential segments were noteworthy in the first quarter accounting for a cumulative 28 per cent of total inflows, the report noted.

With a collective 81 per cent share, Bengaluru and Hyderabad were the frontrunners for investments into the office segment during the quarter. Overall office demand across the top six cities also remained robust, at 13.6 million square feet, marking a 35 per cent increase over the same period last year.

According to the report, institutional investors continued their preference for completed and pre-leased income-yielding office assets as compared to greenfield developments.