While institutional investments in the real estate sector declined by 12 per cent annually to $4.3 billion in 2023, investments in the sector from domestic investors more than doubled to $1.5 billion in 2023, according to the Vestian report. In 2022, the overall investment in the sector stood at $4.9 billion.
The inflow of funds from domestic investors stood at $1,511 million ($1.5 billion) last year, registering a 120 per cent growth over $687 million in 2022. This also led to an increased share of domestic investors, from 14 per cent in 2022 to 35 per cent in 2023, amid global headwinds.
Meanwhile, the share of foreign investors shrank over the previous year on account of the macroeconomic slowdown. While foreign investors continued to dominate investments with a 65 per cent share in 2023, their share decreased from 79 per cent a year earlier to $2,733 million.
Nearly 72 per cent of the foreign investments were concentrated in commercial assets, followed by the industrial and warehousing segments with only 15 per cent.
“Despite uncertainty in demand across the real estate sector, investments remained robust throughout the year. The optimism of domestic investors kept the real estate market buoyant as they continued to show confidence in India’s growth story,” saidShrinivas Rao, FRICS, CEO, Vestian.
In terms of asset class, commercial assets (office, retail, co-working, and hospitality projects) turned out to be the preferred investment option for domestic investors, with a 42 per cent concentration of investments, followed by 39 per cent in residential projects.
Additionally, a significant rise in bank outstanding and the easy availability of funds through new investment tools (AIFs, REITs, and InvITs) paved the way for heightened construction activities across the sub-sectors of real estate.
According to RBI data, banks’ lending to commercial real estate increased by 38 per cent in November 2023 compared to the same period last year. On the other hand, banks’ outstandings for housing, including priority sector housing, increased by 37 per cent during the same period, according to the report.
Although investments reached a five-year low, accentuating the cautious stance adopted by foreign investors amid global macroeconomic uncertainty, the report expects a resurgence in 2024 on the back of the robust performance of the Indian economy and a healthy pipeline of planned infrastructure developments. Stabilising the world economy, economic growth in India, a huge domestic consumer base, growing emphasis on work-from-office policies, and favourable government policies such as the National Logistics Policy and Make in India initiatives are likely to attract foreign and domestic investors to actively participate in India’s growth story.