Share of domestic investors in real estate market is rising: Colliers

• In India, investments in the office sector accounted for almost half of total investment in the real estate sector.
  
• The report predicts office rental activity could remain subdued in the fourth quarter.
  
• A similar trend was observed in the residential sector and the storage/logistics segments, which witnessed buoyant demand and a steady increase in take-up rates.

Despite losing momentum due to rising interest rates and high inflation, the Indian real estate market performed well in the third quarter, according to a Colliers report. For the nine-month period between January and September 2022, investment in Indian real estate was $3.6 billion, up 18% yoy.

“Capital inflows into Indian real estate continue to pour in as the narrative of long-term sustainable growth remains intact. Furthermore, the trend in housing sales reflects positive long-term structural changes in the sector. Investments in India are getting broader base with greater participation of domestic investors”, says Piyush Gupta, General Manager, Capital markets and investment services, Necklace India.

Gupta also said newer avenues are evolving, such as partial ownership, alternative investment funds (AIFs) and pooled investment structures provide depth to both investors and developers.

According to the report, domestic investors accounted for about 18% of investment between January and September 2022, compared to 14% last year. “At the same time, global investors continue to dominate financing activity with greater participation in entity-led deals. However, global investors are waiting for recessionary pressures to continue,” said Vimal Nadar, senior director of research at Colliers India.

Investments in the commercial office sector experienced a 53% year-over-year growth, according to the Snapshot of the Asia-Pacific market | Q3 2022 report. Investments in the office sector accounted for almost half of total investments in the real estate sector.

By 2022, office rentals in the six largest cities are likely to exceed 50 million square feet, surpassing the highs of 2019, the report said.

However, the report predicts office rental activity could remain subdued in the fourth quarter (Q4) due to fears of a global recession, but technology adoption in the workspace will drive innovation and demand going forward.

The storage and logistics segments also witnessed buoyant demand and a steady increase in take-up rates. In the residential sector, this was mainly due to lower interest rates and holiday offers.

Colliers believes that industrial and logistics spaces are likely to continue to gain favor after announcing a whopping $20 billion in investment in the country’s manufacturing sector.

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