In 2021, the most sought-after sub-industry in the real estate space was industrial and logistics, with investments reaching a five-year high of US$1.1 billion, a five-fold increase from 2020.
According to Colliers, this growth momentum is projected to continue in 2022 as big global investors and developers continue to expand their footprint in close proximity to high-demand locations throughout Tier I and II cities. Due to increased demand from e-commerce and 3PL players following the epidemic, the industry has attracted a lot of interest from operators and investors.
Colliers India’s Managing Director, Capital Markets and Investment Services, Piyush Gupta, remarked, “The epidemic has accelerated various structural tendencies and will have long-term implications for India’s real estate industry. Investments across asset classes experienced encouraging inflows in 2021, indicating a number of chances for investors to refocus their strategies on growth industries. This can already be seen in the increased investment in residential sector, data centre development, alternative energy, industrial, office, and the progress of the life science sector. There is a reflection of the industry’s confidence in its ability to participate in the growth story and, as a result, develop, build, and control real assets over time.”
In 2021, total institutional real estate investment volumes were US$4 billion, a 17 percent decrease year over year. Capital flows, on the other hand, came on a broad-based rebound across most asset classes and countries, with the number of deals more than doubling from 2020, according to the research report.
The industrial and warehousing sector accounted for half of all investment in 2021, while the office sector drew the most money ($1.2 billion), contributing for 31% of overall investment. This reinforces the sector’s resiliency and long-term growth story.
“The year 2021 has seen a strong investor appetite for residential and industrial & logistics sectors while office continues to be dominant. The broad-based recovery signals sign of ebullience amongst investors and expansion of REITs, asset diversification, imminent potential in industrial & logistics will keep them busy in the Indian market. Moreover, niche asset classes such as data centers, student housing and life science will provide a unique opportunity for investors to diversify their investments.” said Vimal Nadar, Senior Director and Head of Research, Colliers India.
According to the Colliers report, inflows into the residential segment surged by two-fold year over year, owing to a recovery in the residential sector and increasing demand for capital. Private equity funds are interested in providing money for new residential developments as well as refinancing/restructuring existing bank and NBFC loans. The luxury market accounted for around 35% of overall investments, with the rest going to projects in the mid-income and affordable categories. In 2021, luxury residential projects will see increasing investment as demand for larger homes and gated communities has climbed dramatically over the previous year.
The share of single city agreements increased by two-fold in 2021 compared to the previous year, demonstrating investors’ growing preference for select high-quality properties in key areas. Mumbai dominated the investment pie in 2021 with a 20% share, due to increased investments in select luxury residential developments and data centres. Foreign private equity investors continued to dominate investment volumes, although domestic funds have showed increased confidence in comparison to previous year, owing to the economy’s steady recovery.