Why Global Investors Are Betting Big On India's Commercial Real Estate

Investment inflows in the office sector rose 41% over a year earlier to $907 million in January–March.

Tower cranes operate at an Indiabulls Real Estate commercial building construction site in the Lower Parel area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Global investments in the domestic office real-estate jumped in January–March as Indian cities offer higher yields at relatively lower prices in Asia-Pacific.

Investment inflows remained upbeat in January–March, rising by 37% year-on-year to $1.7 billion, led by the office sector, according to investment management firm Colliers.

Global investors, including non-resident Indians, remained inclined towards office and industrial assets, and dominated the total investment inflows at 76% share during the March quarter, according to the data.

The findings shed light on the significant inflows across different real-estate asset categories, with the office sector continuing to drive the investment inflows and accounting for 55% of the total inflows during the January–March period, followed by the residential sector with a 22% share.

Investment inflows in the office sector rose 41% to $907 million from $643 million over last year, led by select large deals, the Colliers data showed, as key institutional investors have been entering into strategic partnerships to strengthen their presence and expand their office portfolio in India.

Larger markets, such as the National Capital Region and Bengaluru, attracted one-third of the total investments during the quarter, led by increased activity in these markets. However, the majority of the inflows (63%) were through multi-city deals.

The appetite of global institutional investors for office assets remains strong due to India's growing talent pool, digitisation, enhanced transparency in deal structures and stable returns, according to Vimal Nadar, head of research, Colliers India.

Foreign investments accounted for about 93% of the total investments in office assets during the first quarter of 2023, the senior director said. "Led by increased opportunity, we are likely to see more collaborations to develop platforms for developing high-quality Grade A office assets."

NRI Craze

A neo-realty survey by MYRE Capital shows that 53% of NRI investors chose commercial real estate over other investment options, according to Aman Trehan, executive director at real estate developer Trehan IRIS.

The report also highlights that 82% of the NRI investors are first-time and new-age investors, reflecting the increased awareness and strengthened sentiments that are driving the surge in their investment, Trehan said. "We expect the growing economy, supportive government policies and higher return on investment to continue to drive the NRI investment in the commercial segment."

Interest In Residential Space

The total investment in the residential sector stood at $361 million, with a large chunk of the investment flowing into the luxury segment. DLF Ltd. achieved sales worth over Rs 2,000 crore from NRI investors in the 2023 financial year, the company said in a statement via email to BQ Prime. Customers from markets like the Middle East, US, UK and Singapore contributed to the above figures.

In the last two years, the contribution from NRI investors in DLF's home business has been between 14% and 20%, Chief Business Officer Aakash Ohri said.

Major metro cities have always been the preferred choice of NRIs in India. But investors have recently set their sights on emerging cities like Chandigarh, Panchkula (Haryana) and Kochi—non-metro destinations with lower density—as they look for holiday homes or second homes for personal usage as well as vacation rentals, the DLF group executive director said.

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