Institutional investments in the Indian real estate market decreased by 12% in 2023 to $ 4.9 billion in 2022. According to data released on Thursday by workplace solutions company Vestian, it is the lowest investment in the sector since 2019, when it was $ 6.5 billion.
It emphasized the caution investors demonstrate in the face of global challenges. From $3.9 billion in 2022 to $2.7 billion in 2023, foreign investments decreased by 30%. Its portion of institutional investment overall fell from 79% to 65% in the previous year.
With 72% of their investments in this sector, foreign investors concentrated more on commercial assets. The industrial and warehousing sectors came in second, accounting for 15%.
Nonetheless, domestic investors remained confident in the industry; total investments doubled to $1.5 billion in 2022 from $ 687 million. The share of domestic investors increased to 35% in 2023 from 14% in 2022.
Domestic investors allocated 42% of their investments to commercial assets. Thirty-nine percent of residential projects came next.
“The optimism of domestic investors kept the real estate market buoyant as they continued to show confidence in India’s growth story,” said Shrinivas Rao, chief executive officer at Vestian.
In part, due to the cautious nature of foreign investors, the co-investment also saw a 95% decline, from $360 million in 2022 to $18 million.
Previous data from Colliers revealed that institutional investments in the industry decreased during the October-December quarter. During the quarter, these investments totaled $822.3 million, a 37% decrease from $1,299.40 million during the same period last year.
Vestian anticipates that institutional investments will return in 2024 due to the Indian economy’s robust pipeline of planned infrastructure projects.
New asset classes are causing the Indian real estate market to explode. As the market expands, so does the need for funding. Rao believes that an increased need for capital could lead to a high return on investment for investors.
“As investors anticipate high returns, they may inject capital into the sector, resulting in further growth and expansion, thereby driving the need for higher capital investments.”