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Reviewing the overall performance of the Indian residential real estate market in 2021, it came out resilient and stronger as the investors remained positive on Indian property market fundamentals.
As per Colliers India, the investments across asset classes saw promising inflows in 2021 and has been one of the best years for the industrial & logistics and residential sectors, accounting for about half of the total investments at about USD2 billion.
OFFICE AND INDUSTRIAL & LOGISTICS SECTOR
The Office sector attracted the highest investments at USD1.2 billion, accounting for 31% of the total investments in 2021. This reaffirms the resilience and the long-term growth story of the sector. On the other hand, the industrial and logistics sector was the most sought-after and investments rose to a five-year high of USD1.1 billion. This was also more than a five-fold increase from 2020. The sector has been drawing strong operator and investor interest due to increased demand from e-commerce and 3PL players post pandemic.
INVESTMENTS IN THE RESIDENTIAL SECTOR
Inflows in the residential segment witnessed a significant uptick with a two-fold increase YoY amid a recovery in the residential sector and increased demand for capital. Private Equity funds are looking at providing capital for fresh investments in residential projects, and also for refinancing/restructuring existing loans of banks and NBFCs. The luxury segment accounted for about 35% of the total investments, with the rest in mid-income and affordable category projects. Luxury residential projects witnessed increased investments in 2021 as demand for bigger homes and gated communities has significantly increased during the past one year.
As compared to last year, the share of single city deals witnessed a two-fold increase during 2021, indicating investors’ rising preference towards specific high-quality assets in key locations. With increased investments in select luxury residential projects and data centres, Mumbai led the investment pie in 2021 with a 20% share. Foreign private equity investors continued to have the majority share in the investment volumes, but domestic funds have shown higher confidence, compared to last year, led by a steady recovery in the economy
INVESTMENTS IN ALTERNATE ASSET CLASS
Investments in the alternatives continued the growth momentum during 2021, led by data centres. Alternate assets (student housing, co-living, life sciences, data centers) accounted for 11% of the total investments in 2021, from 8% in 2020. Data centres garnered the highest share of about 60% in total investments in alternate assets in 2021. We expect investments in data centers to further accelerate in the next 2-3 years, a major data centre and digital infrastructure companies are creating platforms and JVs to expand their presence in India.
Along with data centers, investors’ appetite towards student housing and life sciences sectors increased during 2021, with major private equity investors such as Warburg Pincus and Cerestra making investments in the sectors. In 2021, Canada based Ivanhoe Cambridge committed investments worth USD100 million to develop a 1 million square ft of life science and R&D office labs in Genome Valley, Hyderabad.
NRI INVESTMENT IN INDIA
According to a report by 360 Realtors, NRIs invested $13.1 billion in the Indian real estate market in FY21 and the inflow is likely to grow 12% to reach $14.9 billion in FY22. Apart from low prices, favorable currency movement, technology has played a key role in enabling NRIs to purchase property in India without being physically present.
THE YEAR 2021 HAS SEEN A STRONG INVESTOR APPETITE FOR RESIDENTIAL AND INDUSTRIAL & LOGISTICS SECTORS WHILE OFFICE CONTINUES TO BE DOMINANT. THE FORMER BREACHED RECORD HIGHS IN RECENT TIMES LAPPING UP NEARLY USD2BILLION OF THE OVERALL INSTITUTIONAL INVESTMENT VOLUMES.
RESIDENTIAL AND INDUSTRIAL & WAREHOUSING SECTORS HAVE EMERGED AS MAJOR BENEFICIARIES THIS YEAR, GARNERING A COMBINED 36% OF THE INVESTMENTS.
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