Attracting $2.5 billion in Q2, Indian realty hits a 3-year high

New Delhi: The Indian realty sector saw an investment inflow of $2.5 billion in the second quarter of the current calendar year - the highest in any quarter since 2021, professional services and investment management company Colliers reported. 

The industrial and warehousing segment took the lion’s share of this inflow at 61 per cent drawing investments to the tune of $1.5 billion, led by select large deals. This was a surge of 11 times of the amount seen in the corresponding period in 2023. The residential segment witnessed a significant rise in quarterly inflows capturing a 21 per cent share of total institutional inflows into Indian real estate, 7.5 times of what it saw in Q2 2023.

Foreign investments remained robust, accounting for 81 per cent of the total influx in Q2 of 2024, predominantly led by investors from the US and UAE. Domestic investors infused $0.5 billion, which was 2.8 times of the infusion in Q2 2023.

In contrast, office assets witnessed subdued activity in Q2 2024 with investments of $0.3 billion. Although the annual decline was significant at 83 per cent, the quarter on quarter drop was lower at 41 per cent. 

The surge in industrial and warehousing and residential investments resulted in an investment volume of $3.5 billion for the first half (H1) of 2024 at an overall level, making up for the slow start in the first quarter. 

“Private equity investments in Indian real estate have shown remarkable resilience and strength in the first half of the year at $3.5 billion, reflecting robust market confidence. With foreign investments leading the charge at a significant 73 per cent share in H1 2024, the sustained momentum is expected to drive positive sentiment for the entire year,” said Piyush Gupta, Managing Director, Capital Markets and Investment Services at Colliers India.

“The domestic institutional and retail investor activity in Indian real estate is also expected to remain strong in the second half of the year, driven by healthy economic activity and consumer confidence," he added.

Amidst significant spurt in e-commerce and retail consumption in India, various asset-level investors are likely to enter the market, boosting the demand for AI-enabled warehouses and micro-fulfilment centres in upcoming quarters, the report said.

“Interestingly, institutional investments in the segment for H1 2024 is almost twice the inflows in the entirety of 2023. With India's manufacturing Purchasing Managers' Index (PMI) staying close to 60.0 in the last few months, investor confidence in the industrial and warehousing segment is likely to remain strong throughout 2024,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.

While at 72 per cent share, multi-city deals continued to drive the majority of the investment inflows during Q2 2024. Bengaluru and Delhi NCR together took about 23 per cent of the total inflows during the quarter driven by foreign investments.