Indian Real Estate Market Was Topped By Investments in Industrial & Logistics, Residential With More Than 50% in 2021, Year 2022 Looks Better

Indian Real estate looks set to revive in 2022. In the last year of 2021, institutional investors in real estate have pumped in close to a total amount of USD 4 billion. It's down 17% year over year, but capital inflows in Indian real estate overall are up across major asset classes and regions, and transaction volume has more than quadrupled since 2020.

A further reason for the drop is that certain significant deals were completed in 2020. 

Sector-wise allocations in Indian real estate

Indian Industrial & logistics and residential sectors accounted for almost half of the overall investments in 2021, which totaled around USD 2 billion. At a total investment of USD 1.2 billion, the Office sector in India accounted for 31% of the total investments in 2021. Therefore resilience and long-term development in the industry are reaffirmed.

An extremely positive factor is that the industrial and logistics sector in India had a five-year increase in investments of USD 1.1 billion, making it the most sought-after.

Comparisons to 2020 and predictions for 2022 & the role of E-commerce and 3PLs

Compared with the year 2020, this was a fivefold rise in the real estate sector concerning e-commerce and third-party logistics. Increased demand from e-commerce and 3rd party logistics providers during the epidemic has sparked a lot of interest from operators and investors for this sector in India. Global investors and developers will continue to extend their presence in high-consumption regions in Tier I and II cities of India in 2022.

Re-arrangement Due to the pandemic

As a result of the epidemic, a number of long-term structural tendencies have been accelerated and will have a lasting impact on the real estate industry in India. Investing across asset classes in real estate In India has shown an increased inflow in 2021, representing several chances for investors to re-calibrate their approach towards growing industries in India.

This can already be seen in the flurry of money going into residential construction; data center expansion, alternative uses, industry, and office space, as well as the rise of the life science industry in India. Reflecting confidence in participating in long-term growth stories of the Indian real estate sector, there is a strong desire by real estate investors to establish long-term real assets.

Positive Indian Economic Outlook

The year 2021 has witnessed a high investor interest for the Indian residential and industrial & logistics sectors, but the office sector in India continues to be the dominating one. Nearly USD 2 billion of institutional investment volume has been accounted for by the latter in recent years. The robust fundamentals and reasonable prices of the underlying real estate assets accompanied by a healthy Indian economic outlook resonate with this statement.

Soaring demand for capital

Increased demand for capital as well as a rebound of the residential sector led to a two-fold rise in residential inflows year-on-year. Existing bank and NBFC loans may be refinanced or restructured with the help of Private Equity funds, as well as new investments in residential real estate and residential developments.

Growth of luxury real estate in India

More over a third of the total investments went toward luxury buildings; the remainder went toward mid- and low-income housing. Greater demand for larger houses and gated communities has led to a rise in luxury residential project investments in 2021. Mumbai, Delhi-NCR, and Bengaluru account for two-thirds of all city-specific agreements.

The real estate investment in single city agreements increased by two-fold during 2021, demonstrating investors' growing preference for particular high-quality properties in important regions.

For the year 2022, real estate in Mumbai is predicted to have more than a 20% portion of the investment pie, thanks to the focus on Mumbai luxury residential developments and data Centre construction. Domestic funds that have been allocated into Mumbai real estate have shown more confidence than last year, thanks in part to a gradual rebound in the economy, despite the fact that foreign private equity investors still hold the bulk of investment volumes.

Alternative real estate investments in India; student housing, co-living and life sciences

In 2021, alternative investments, spearheaded by data centres, continued to strengthen the growth momentum. To put it another way: Alternate assets (such as student housing, co-living and life sciences) accounted for 11 percent of all investment in 2021 (from 8 percent in 2020). As of 2021, data centres accounted for a whopping 60% of all investments in alternative assets. Data Centre and digital infrastructure businesses are developing platforms and joint ventures to enhance their footprint in India during the next 2-3 years.

Private equity investors like Warburg Pincus and Cerestra have shown a growing interest in the student housing and life sciences industries in 2021, along with data centres. Canada-based Ivanhoe Cambridge plans to spend $100 million over the next five years to build a 1 million-square-foot life science and R&D office complex in Hyderabad's Genome Valley by 2021.