As per the JLL analysis, the institutional investments in the Indian real estate sector has witnessed an upsurge to USD 4.8 billion across 40 agreements in the first half of 2024 (H1 2024). This is amidst the time when the global economy was facing difficulties.
It is important and at the same time exciting that eighty-one percent of the USD 5.8 billion in investments planned in 2023 had already been invested in the first half of 2024. Having said that, there was a little decrease in investment volumes during Q1 2024 (January to March), but saw a strong investment activity the next quarter. Furthermore, in H1 2024, there were twice as many agreements than in the same period the previous year, with an average deal value covering USD 113 million.
In the first half of 2024, Foreign institutional investors (FIIs) controlled USD 3.1 billion, i.e., controlling 65 percent of all Indian assets. Domestic investors made up 37 percent of investments in 2023. This is an increase from an average of 19 percent over the preceding five years. Furtheromre, it is expected that H1 2024 seems to be following this pattern, with local investors accounting for 35 percent out of the overall. Also, suggesting a shift in investor inclinations towards this particular asset class, there has been a notable resurgence of the residential sector in the Indian real estate market.
In terms of transaction volume, residential investments outpaced the office sector by 25 percent with 25 acquisitions totaling USD 1.6 billion. Also, iIt's noteworthy that while international investors continued to favor the office and warehouse sector, local investors have demonstrated a stronger preference for residential assets," remarked Samantak Das, Chief Economist & Head of Research, India in JLL Mumbai.
Furthermore, investments in the office sector, which institutional investors have traditionally favored, saw a downside in H1 2024 as compared to the prior year. And with a 34 percent investment share, the warehouse industry spearheaded, while closely being followed by the residential sector with a 33 percent share. It's crucial to remember that the warehouse industry's investment boom was mostly caused by a single transaction though; accounting for more than 92% of all transactions in the sector in the first half of 2024.
In addition, the residential sector had an all-time high half-year investment of $1.6 billion, due to regulatory changes and increased segment openness during the previous five to seven years. Also, debt accounted for 68 percent of the deals in this industry, with debt being the main source of investment.
Going forward, India's real estate market would be further strengthened by this diversification, which will also open up new investment options. "The real estate industry has had a highly positive trend in private equity investment, with the greatest investments since H1 2006 occurring in H1 2024. We think in the long-term resilience of the Indian real estate industry, notwithstanding the dangers posed by uncertainty and monetary tightening in industrialized nations,” stated Lata Pillai, Senior Managing Director, Capital Markets, India, JLL.
