FIIs bet big on India's realty sector; industry pins hope on job opportunities, boost in construction activity

The Indian real estate industry has experienced a significant rise in foreign institutional investments (FIIs) over the past five years. According to the recent report by real-estate consultant Colliers, the industry saw a three-fold increase in foreign investment between 2017 and 2022. 

This surge in foreign investment has been a game-changer for the Indian real estate sector. With more foreign investors putting money into Indian real estate, the industry has seen a significant boost in construction activity, which has, in turn, created new jobs and opportunities for those in the industry.

“The rise in foreign investment is a testament to the growing interest and confidence in the Indian real estate industry. It has significantly boosted the sector, especially in terms of construction activity and job creation. NCR has come to hold a pre-eminent position in India’s realty-scape besides increasing its global prominence. RERA has also played a vital role in the implementation of favourable norms in the sector, enhancing the confidence of both domestic and international investors in projects. This has led to transparent transactions between developers and buyers, increasing foreign investments in the region,” says Manoj Gaur, President CREDAI NCR and CMD Gaurs Group.

Reason for increase in foreign investment in India's realty sector

The primary reason behind the increase in foreign investment is the Indian government’s push for transparency and ease of doing business. The government has implemented several reforms in recent years, including the Real Estate (Regulation and Development) Act, 2016 (RERA), which has helped restore industry confidence.

“The rise in foreign institutional investments clearly indicates the Indian real estate industry’s strong structural foundation & underlying potential. NCR continues to be one of the top markets on the radar of foreign institutional investors, who are especially betting high in the office segment. However, there are a host of other categories such as data centers, capability centers, co-working, etc. which are drawing investor interest. The investors which comprise wealth funds, pensions funds, PE arms, etc. are lured by strong macroeconomic stability of India coupled with an overall improvement in the business climate,” says Ankit Kansal, MD, 360 Realtors.

Bengaluru, Mumbai among preferred investment destination  

The report suggests that the rise in foreign investment has been spread across different regions of India. Bengaluru leads office yields in the region while Mumbai leads in industrial assets yield

“Foreign institutional investments have brought capital to the Indian real estate industry. According to another Anarock report, around 20 per cent of NRIs plan to buy homes in NCR cities as an investment, again encouraging news. Foreign investments accounted for a whopping 81 per cent share of the total investments in real estate, as per the report, between 2017-22,” says Rajesh K Saraf, MD, Axiom Landbase.

The rise in foreign institutional investments in Indian real estate has been a positive development for the industry and the economy. 

It has created new job opportunities and helped to boost demand for raw materials and other ancillary industries. However, the government and industry stakeholders must ensure that the industry remains stable and sustainable in the long run.