Institutional investments reached USD 4.6 billion in Indian real estate from January to September 2023, a 27% YoY increase, demonstrating the market's resiliency and appeal despite ongoing global challenges. It is worth noting that institutional investment inflows for 2023 have already reached 93% of the total inflows recorded in 2022, despite a clouded global economic environment. While foreign investments continued to lead with a 77% share of total investments, domestic investments remained strong and witnessed a two-fold rise YoY at USD 1.1 billion. Interestingly, domestic investments led investment activity in Q3 2023, forming 63% of the total investments, abutting the overall investment volume at USD 0.8 billion for the quarter. While office assets saw a moderation in inflows during the quarter, residential and, industrial & warehousing segments witnessed a rebound accounting for about 78% of the total investment volume.
India’s sturdy economic growth and a continued strong positive play of high-performance economic & market indicators are keeping long-term confidence high amongst global & domestic investors. Investment inflows in the office sector rose 1.6X YoY during January–September 2023, to USD2.9 billion, led by select large deals in the sector. This robust performance underscores the sustained confidence of investors in the sector's growth potential and returns. There is increased investor interest in completed and pre-leased income-yielding office assets, reflecting a conscious & cautious shift in investor strategies. Investors are actively forming large Joint Venture (JV) platforms to capitalize on emerging opportunities and participate in existing as well as upcoming office projects. While investors remain committed to the office asset class during 2023, the industrial & warehousing and residential sectors also saw a significant rebound.
The market has seen an increase in activity from domestic investors, contributing 23% of the total investments during this period, compared to an 18% share in the same period in 2022, infusing the majority of the funds into the residential sector. Nonetheless, foreign investments maintained their lead during Jan-Sep 2023, accounting for a 77% share of total investments with USD3.5 billion inflows. This was a 47% YoY surge compared to the same period last year. Investment inflows into industrial assets have surged by a stirring 3.5 times, reaching USD 690.6 million during January–September 2023. This extraordinary growth can be attributed to the industrial sector's continued growth, which has benefited from rising consumption levels.
India's bolstering manufacturing sector has been a prominent driver of this growth, advancing at an impressive pace owing to robust demand and increased industrial output. Key indicators such as the Index of Industrial Production (IIP) in India increased 5.7% year-on-year in July 2023, while India's Manufacturing Purchasing Managers' Index (PMI) rose 4% YoY at 57.5 in September 2023, signalling strong demand conditions and enhanced business sentiments within the manufacturing sector. The upturn in domestic consumption trends and rising demand from 3PL players indicate an attractive investment scenario in the foreseeable future.
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