Asian investors' share in Indian real estate on a surge: Report

The share of investment in the Indian real estate sector from Asian investors surged from 15 per cent in 2019-2020 to 47 per cent in 2021-2023, a signal that confidence in the Indian market is on the rise, according to a report by Savills India, which is into real estate consulting.

While the US and Canada origin funds were primary sources in the past, there is now increased interest from Asian investors, particularly from Singapore, Japan and Hong Kong, the report titled 'Rising Opportunities: Private Equity in Indian Real Estate' said.

The real estate sector, constituting about an estimated 7.3 per cent of India's GDP, has undergone notable transformations, especially in its financing landscape post-pandemic, with renewed confidence from private equity funds.

Over the past decade, the Indian real estate sector has been bolstered by significant policy interventions resulting in improved regulation and structure, including the PMAY (Urban and Gramin) program, and the growing adoption of technology in the real estate sector over the last decade, RERA Act of 2016.

According to Savills, these interventions have facilitated foreign investments, initially concentrated in office and residential segments, now expanding into emerging asset classes.

Private equity investors have injected USD 10.7 billion (Rs 843 billion) into the sector across nearly 100 deals from 2021 to 2023, the report asserted.

Transaction volumes have increased by over 25 per cent annually, with investment values rising 13.7 per cent, reaching USD 3.9 billion in recent years. The average deal sizes have ranged between USD 100-120 million (Rs 8.3-9.9 billion) during this period, it said.

Notably, the office segment secured the majority share of investments at 51 per cent, followed by industrial and warehousing at 20 per cent, while diversification into sectors like data centres, life sciences, and student housing reflects evolving investor preferences.

Over the past few years, there has been a significant surge in fund allocation to alternative segments such as industrial and warehousing, data centres, life sciences, and student housing with USD 3.1 billion (Rs 238 billion) invested in alternatives during 2021-2023, constituting about 29 per cent of total investments.

"The surge in private equity investments underscores India's vast potential. To drive further growth, we must expand our asset pool and enhance the investor-friendly environment," said Arvind Nandan, Managing Director, Research and Consulting, Savills India.

"Simplifying regulations and addressing sector-specific challenges are crucial for boosting investor confidence and unlocking new opportunities. With a promising economic outlook and conducive policies, India's real estate is sure to tread the growth path."

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