Due to rising inflation and geopolitical concerns, foreign investments in the Indian real estate market, led by the US, decreased in 2023. The most popular investment asset was, remarkably, office space.
Amidst global uncertainties, American institutions’ investments in the Indian real estate market dropped by 39% in 2023 to $1.35 billion, according to JLL India. Despite this, foreign institutional investors remained the primary contributors to the Indian real estate market, accounting for 63% of all investments in 2023 after increasing by 14% from the previous year.
Since 2006, investors worldwide have found India’s real estate market particularly appealing, especially those from the US. US investments have regularly made up 40-45 percent of total investment inflow over the last five years.
India has grown economically despite obstacles like the global economic downturn and geopolitical unrest.
In 2023, the country’s real estate market brought in over $5.8 billion in institutional investments through 53 deals, up 14% from the year before, according to JLL India.
Lata Pillai, senior managing director and head of capital markets at JLL India, stated that inventors are becoming more cautious due to the current mix of inflationary pressures and geopolitical uncertainties in the US economy.
Several foreign investors, including Blackstone, GIC, Abu Dhabi Investment Authority, Brookfield India Real Estate Trust, and Canada Pension Plan Investment Board, are involved in the Indian real estate market.
With $50 billion in assets under management as of December 2023, investment firm Blackstone stands out as one of the largest investors in the nation. The company specializes in real estate investments in malls, hotels, data centers, and warehouses.
Office space remains the most popular investment option based on industry tastes; by 2023, it will account for 52% of all investments.
In the upcoming years, Pillai predicted, “new-age sectors like student housing, data centers, and housing are also gaining attention from inventors and will continue to attract a substantial share of institutional investments.”
According to Vestian, a commercial real estate services company with $4.6 billion in investment deals and platform commitments, the office sector has remained the most popular. As of 2023, it held the highest percentage of all declared investments (52%); the following highest percentages went to residential (32%) and logistics and industrial (13%).
Vestian highlighted that because of their higher returns, the prominence of organized players, and their transparency, commercial assets have always been the “preferred choice” of foreign investors.
“In India, the average rental yield for residential properties is between 2-3 percent, while the average for commercial properties is 7-8 percent. Additionally, organized players and a transparent business environment increase investor confidence,” stated Vestian CEO Shrinivas Rao.
After Embassy Real Estate Investment Trust departed, Blackstone became India’s office property owner, covering 70 million square feet. In addition, Blackstone has worked with the Embassy Group, K Raheja, Panchshil, Salarpuria, and Hiranandani on multiple projects.
According to Vestian, foreign investors looking for higher investment returns will pour money into the Indian real estate market as soon as the global economy stabilizes.
“Planned infrastructure developments and the strong performance of the Indian economy are expected to drive growth, even in the face of a global slowdown,” stated Pillai.
In addition, Pillai predicts that new investment opportunities such as data centers, flexible spaces, real estate investment trusts, and infrastructure investment trusts will expand rapidly in the upcoming years due to intrinsic domestic demand.