Foreign capital in realty jumps to $24 bn during 2017-2021: Report

Hyderabad: The foreign capital flows in real estate jumped three times to $24 billion compared to the preceding five-year period, as per a Colliers report.

It released a report on 'Foreign investments in the Indian real estate turn a corner' in association with Ficci. Over the last five years, global investors have shown an increased inclination towards investment in the Indian real estate buoyed by regulatory reforms introduced in 2016.

Foreign investors, who had previously refrained from investing in the Indian real estate market due to the lack of transparency, started investing in the country with greater optimism from 2017. The share of foreign investments in the Indian real estate has grown to 82 per cent during 2017-2021, compared to 37 per cent in the preceding five-year period.

Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India, said, "We are witnessing a buoyancy in global capital inflows in India across asset classes, with office and industrial assets remaining the most preferred."

The investors continue to invest with developers with proven expertise in respective business areas to build and acquire long-term sustainable assets. With residential sales continuing to do well across markets in India and available opportunities to grow for developers, more structured capital is likely to flow into the sector, he added.

During 2017-21, the office sector held the frontline of foreign investments with 43 per cent share in total foreign investments followed by mixed-use sector accounting for 18 per cent share in total foreign investments. Office sector saw a significant uptick in foreign capital flows post regulatory reforms in 2016, like enhanced transparency, robust demand for Grade A office space and exit avenues like REITs bolstered investments. Foreign investments in the office sector have consistently reached $2 billion in each year since 2017 except in 2021, where the quantum of investments almost halved.

The investments in the industrial and logistics sector stand at position three surpassing the residential sector. Foreign investors remained cautious about the residential sector in the aftermath of the NBFC crisis and subdued residential sales. The share of residential assets in total foreign investments has reduced to 11 per cent in 2017-2021, from 37 per cent in a preceding five-year period.

"Demand for alternative assets including life science labs, data centres, flex spaces has grown during the pandemic as investors seek new avenues for growth and returns. Data centres garnered a maximum share of 52 per cent of foreign investments in alternatives in last five years. Lack of income producing data centre assets in key locations and scope for future REIT listings will push investors to form new platforms for development opportunities. In the past five years, capital commitments equating $13.5 billion have been made by global data center operators, corporates, and investors for the development of data centers in India", says Vimal Nadar, Senior Director, Research, Colliers India.