India’s real estate investment volume hits USD1.07b in Q1

Over half of the volume came from foreign investors.

According to a Cushman and Wakefield report, the investment activity remained marginally subdued for the second-consecutive quarter in Q1-23 with merely INR 88.3 bn (USD 1.07 bn) of private equity inflows being recorded. 

“Foreign investors, which were the dominant equity investors in the Indian real estate space, seem to have slowed down a bit given the concerns around the global economic headwinds,” the report said.

Here’s more from Cushman and Wakefield:

Foreign Investors accounted for almost INR 41 bn (USD 0.53 Bn) with investment inflows from entities in Hong Kong, Singapore and USA, majorly in L&I, Office and Residential segments. 

The office sector, which has been a dominant sector in terms of attracting PE investments, has seen its share come down over the last two quarters with the latest reading coming at 22%. One of the reasons for investments in office real estate slowing down is the lack of supply of quality-grade assets beyond what is already held by listed and institutional players. 

The L&I segment was leading with a share of 25% during the quarter. There was a diversification of fund allocation observed in the first quarter across sectors such as L&I, Office, Residential, Mixed-Use as well as Hospitality real estate. 

The NCR region took the lead this quarter, accounting for 40% of total inflows with deals focused on industrial and mixed-use (office, retail) developments. Multi-city fund flows constituted 38% of the quarterly values. Logistics and Industrial (L&I) segment witnessed the highest investor interest with inflows close to INR 21.7 bn (USD 0.2 bn), accounting for close to 25% share, followed by office (22%) and residential (20%). PE investments in the L&I sector were majorly in asset buyouts of mid-to-large scale projects, while office asset inflows were majorly capital infusion in the development stage along with some asset buyouts. Equity investment constituted about INR 59 bn (USD 0.72 bn) during Q1 2023, making it 67% of the total quarterly inflows

Strong fund-raising activity for commercial, data center and L&I segments announced

The start of this year witnessed healthy fund-raising announcements in the office, data center, and L&I sectors. About USD 0.46 bn worth of commitments were announced recently, focused on L&I sector expansion plans. Close to USD 4.8 bn commitments were announced during this quarter

REITs and InvITs expected this year 

Along with two large office REITs (close to 45 million each) in the works, and a maiden retail REIT ready for listing in a few weeks (valued at close to USD 500 million), India would also see its first logistics-focused InvITs. NDR Warehousing, based in Delhi NCR, is currently planning its maiden INR 2,000 Cr InvITs by listing its ~19msf portfolio across India. Similarly, Reliance group has plans to list L&I assets close to about 34 msf and is currently setting up a trust for the process. 

Corporate Transactions in Real Estate 

The quarter recorded corporate transaction volumes of INR 7.74 bn (USD 0.94 bn), a q-o-q decrease of 55% and a 12% decrease from the same period last year. Corporates have likely reduced their spend on real estate citing a global effort to cut down on expenses that are not essentially sales-driven for the interim period. Mumbai took the lead with a majority share of 67% of the total investment volume during the quarter, followed by Pune with a 17% share.