Despite the stagnation in the economy and the clouding fear of recession in the US economy, half yearly investments closed at USD 4.8 bn in the real estate sector. The residential sector experienced a significant revival with reinstated interest and faith of investors compared to last years. The investment volumes in H1 2024 have already reached 81% of the total investments in CY 2023; this marks an all-time highest half-yearly investment in Indian real estate. Although the market scenario was uncertain owing to the general elections in Q2 and the global economic environment, the investors found Indian real estate as a safe option. The stagnated investment activity in Q1 was well covered in Q2.
The real estate sector in India witnessed rising share from FIIs dominated by improved confidence in the market. This scenario is catalyzed by various government initiatives aimed at better transparency and accountability in the sector. FIIs are the largest contributors in the investment holding 65% share while domestic investors hold 35% shares, that is a significant increase from the past 5 years.
Figure 1: Increasing share of investments from domestic domiciled funds in Indian real estate.
This growth in domestic institutions in Indian real estate is established through the increased involvement as anchor investors in Qualified Institutional Placements (QIPs) within Real Estate Investment Trusts (REITs).
Office sector has been one of the top choices for institutional investors since 2015. However, a recent shift is witnessed in H1 2024 with warehousing/storage and residential becoming the emergent preferred asset classes. Although the residential sector has shown a deteriorating trend since 2016, however, it experiences a significant rise in investments during the first half of 2024. This can be ascribed to the inception and further implementation of RERA in 2017. This change resolved the prevalent issues associated with residential investment – transparency and structure. to the regulatory reforms implemented by the government post 2016.
Figure 2: Investments in residential sector (Half-yearly figures of 2024 surpasses fully year figure of last year)
Mumbai-Metropolitan Region (MMR) remains the largest shareholder in the residential investment folio holding 36% followed closely by Bengaluru at 31%. This is due to the rampant infrastructural developments, high return on investment and stable rental yields. The demand in this region is complemented with economic zones, migration of jobseekers from rural, semi-urban to urban regions.
Multiple city investment is becoming a new trend.
Figure 3: State-wise residential sector investments with combined market share of 67%.
Source: Excerpts and figures taken from JLL’s India capital markets H1 2024: Navigating the waves Report
