Institutional inflows in residential sector up 385% in H1 of 2023: Colliers

Another asset class that saw high growth in the flow of money was office assets which saw a 145% jump in inflows in the first half of 2023 to $2.719 billion

The institutional flow of funds in the residential sector in India rose nearly 5x, by 385 per cent, in the first six months of 2023 to $433.4 million compared to $89.4 million in the same period last year, data released by Colliers on Friday showed.

According to the real estate consultancy, this is due to the high demand for homes owing to stable interest rates and healthy affordability levels. 

The inflows in the overall realty sector were up 43 per cent to $3.67 billion from $2.57 billion in H1CY22.

The institutional flow of funds includes investments by family offices, foreign corporate groups, foreign banks, proprietary books, pension funds, private equity, real estate fund-cum developers, foreign-funded non-banking financial companies (NBFCs) and sovereign wealth funds.

On a quarterly basis, however, the inflows in the residential sector were down by a marginal 1 per cent to $72.3 million in the quarter that ended on June 30. This is in comparison with $72.9 million in the same quarter last year.

Another asset class that saw high growth in the flow of money was office assets. It saw a 145 per cent jump in inflows in the first half of 2023 to $2.719 billion from $1.108 billion a year ago.

Also Read: India calling: NRI investments in Indian real estate have doubled

On a quarterly basis, office assets saw a 290 per cent jump in the quarter that ended on June 30 to $1.811 billion as compared to $464.9 million in the same quarter last year. The inflows in the office were at a 10-quarter-high. 

"Office sector is witnessing a re-calibration globally, and hence the decision to invest is also taking longer. Further, interest rates and inflationary pressures are also temporarily keeping the investors in wait-and-watch mode as the investors reprice the global macro risks. The appetite to invest remains strong with newer funds looking to enter the Indian market," said Piyush Gupta, managing director, Capital Markets & Investment Services at Colliers India.

"And apart from owning yielding assets, there is a renewed interest in residential as well," Gupta added. 

Colliers said that REITs are playing an important role in driving the demand for residential as well as office spaces in India. While 11 per cent of Grade A office stock across the top 6 cities is presently listed as REITs, there is further unrealized potential of an additional 57 per cent.

"The sector is expected to witness further push in investments from both global and domestic investors alongside scaling up of REITable office stock in the coming years," said Vimal Nadar, senior director and head of research, Colliers India.

"Going forward, investors are likely to increase exposure towards residential and alternative assets, driven by their strong growth prospects, potential for stable returns and diversification benefits," Nadar added.