Are Investors Confident About Indian Real Estate Investments? JLL Report Finds Key Details

The resilience of Indian real estate shone amid global economic challenges as institutional investments surged to USD 4.8 billion across 40 Deals in H1 2024 (January-June). This already represents 81% of the total investments in 2023, which amounted to USD 5.8 billion, according to a new assessment.

Unshakeable investor confidence in India prevails amidst global uncertainties and the election season, exemplifying the country’s robust economic growth story, real estate consultancy JLL said in a report.

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While investment volumes experienced a minor decline in Q1 2024 (Jan-March), robust investment activity was witnessed in the following quarter. Additionally, the first half of 2024 exhibited nearly twice the number of deals compared to the same period last year, with an average deal size of USD 113 million.

Foreign Institutional Investors (FIIs) dominate Indian investments amounting to USD 3.1 billion which is a 65% share of the total investments in H12024.

In 2023, domestic investors accounted for 37% of investments, compared to an average of 19% over the previous five years. This trend appears to continue in H1 2024, with domestic investors representing a 35% share.

Dr. Samantak Das, Chief Economist and Head of Research and REIS, India, JLL, said, “The residential sector in the Indian real estate market has experienced a significant revival, indicating a change in investor preferences towards this asset class. With a total of 25 deals worth USD 1.6 billion, residential investments surpassed the office sector by 25% in terms of transaction volume. Interestingly, domestic investors showed a greater inclination towards residential properties, while foreign investors continued to favour the office and warehousing sector.”

Office Sector

The office sector, which was historically the favoured investment asset class among institutional investors, saw a decline in investments in H1 2024 compared to the previous year.

Warehousing

The Warehousing sector leads at 34% share of investments followed closely by residential at 33% share. However, it’s important to note that the warehousing sector’s investment surge was primarily driven by a single deal which accounted for over 92% of the total transaction volume in the warehousing sector in H1 2024.

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Although the growth was not broad-based, it underscores the increasing interest in the warehousing sector and the potential it holds for investments in India.

Lata Pillai, Senior Managing Director, Capital Markets, India, JLL, said, “Amidst global economic challenges, India’s resilient economy and optimistic prospects are generating significant investor interest. It is interesting to note that contribution from domestic institutional investors has been increasing over the years with a 37% share in 2023 vis-à-vis an average of 19% over the previous five years.”

“While uncertainties and monetary tightening in developed countries present risks, we believe in the long-term strength of the Indian real estate market. India’s continued status as the fastest-growing nation reinforces our confidence in its market potential,” Pillai added.

Residential Sector

The residential sector achieved an all-time high half-year investment of USD 1.6 billion and this can be attributed to the regulatory reforms and improved transparency in the segment in the last 5-7 years. Investment towards this sector primarily weighed towards debt with 68% of the deals being structured debt.

Also, 57% of the capital flow in the residential sector is being received through domestic domiciled funds, suggesting that foreign funds have a clear preference for investing in the office sector.

As the market continues to mature, an increased investment in emerging sectors is expected. Segments such as data centres, life sciences, student housing, and healthcare will be in focus. This diversification will open new opportunities for investors and further strengthen the Indian real estate market.

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Looking ahead

India’s economy continues to exhibit resilience and a positive outlook for the real estate sector, attracting investors interested in the country’s growth story. The private equity investment outlook remains strong, with a diversification of interest across residential, office, warehousing, and other sectors.

Although the growth was not broad-based, it underscores the increasing interest in the warehousing sector and the potential it holds for investments in India.

Lata Pillai, Senior Managing Director, Capital Markets, India, JLL, said, “Amidst global economic challenges, India’s resilient economy and optimistic prospects are generating significant investor interest. It is interesting to note that contribution from domestic institutional investors has been increasing over the years with a 37% share in 2023 vis-à-vis an average of 19% over the previous five years.”

“While uncertainties and monetary tightening in developed countries present risks, we believe in the long-term strength of the Indian real estate market. India’s continued status as the fastest-growing nation reinforces our confidence in its market potential,” Pillai added.

Residential Sector

The residential sector achieved an all-time high half-year investment of USD 1.6 billion and this can be attributed to the regulatory reforms and improved transparency in the segment in the last 5-7 years. Investment towards this sector primarily weighed towards debt with 68% of the deals being structured debt.

Also, 57% of the capital flow in the residential sector is being received through domestic domiciled funds, suggesting that foreign funds have a clear preference for investing in the office sector.

As the market continues to mature, an increased investment in emerging sectors is expected. Segments such as data centres, life sciences, student housing, and healthcare will be in focus. This diversification will open new opportunities for investors and further strengthen the Indian real estate market.

Looking ahead

India’s economy continues to exhibit resilience and a positive outlook for the real estate sector, attracting investors interested in the country’s growth story. The private equity investment outlook remains strong, with a diversification of interest across residential, office, warehousing, and other sectors.