Office segment accounts for largest investment chunk of Indian real-estate in Apr-June: Report

New Delhi, July 15 (KNN) The office sector accounted for the largest share of investment inflows during H1 2023, standing at 74%, followed by the residential sector at a distant 12%. 

During the first half of 2023, foreign investments in office assets amounted to USD 1.9 billion, accounting for 71% of the total investments in the sector. 

The investment marks a 2.5 times year-on-year increase for H1 2023, bringing the total to USD 2.7 billion.Making up a substantial 74% of investment inflows for H1 2023, the office sector outstripped the residential sector, which attracted just 12%. 

The overall institutional investment inflows into the Indian real estate market surged by 43% year-on-year, amassing USD 3.7 billion in H1 2023.

The office sector accounted for the largest share of investment inflows during H1 2023, standing at 74%, followed by the residential sector at a distant 12%. 

Overall, institutional investment inflows into the Indian real estate market rose by 43% year-on-year to USD 3.7 billion in the first half of 2023.

Despite a weak global economic environment, institutional investment inflows have already reached 75% of the total inflows in 2022. The strong domestic economic outlook and the robust fundamentals of real estate asset classes, including office and residential properties, have contributed to this positive trend. 

Institutional investors have shown a particular interest in the office sector due to increased opportunities, resilient demand, and strong growth prospects over the next 2-3 years.

Factors such as sturdy demand for Grade A office space, a robust supply pipeline, improved transparency, and the availability of exit avenues through Real Estate Investment Trusts (REITs) have bolstered foreign investments in the office sector over the past five years.

Global investors continue to view the Indian office sector favorably, demonstrating an increased appetite for high-quality income-yielding Grade A office assets. 

While many prominent office projects are already funded by top institutional investors, the healthy supply pipeline of over 150 million square feet across the top six cities offers new investment opportunities in the next three years. Investors are forming large Joint Venture (JV) platforms to deploy funds and tap into these emerging office projects.

“Office sector is witnessing a recalibration globally, and hence the decision to invest is also taking longer. Further, interest rates and inflationary pressures are also temporarily keeping the investors in wait-and-watch mode as the investors reprice the global macro risks," said Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers India.

Real Estate Investment Trusts (REITs) have played a significant role in the corporatization of the Indian office market, and favorable regulatory reforms have attracted more investments into the sector. Currently, only 11% of Grade A office stock across the top six cities is listed as REITs, indicating an unrealized potential of an additional 57%.  (KNN Bureau)