Institutional investments into Indian real estate are expected to rebound in 2022 led by broad-based growth on the back of low-interest environment, continued monetary stimulus, improving revenue visibility across asset classes, and inclusive growth policy.
The year 2022 is expected to cross $5 billion mark, which was witnessed by the Indian real estate annually during the 2017-2020 period, showed a JLL India estimate.
Institutional investments managed to cross the $5 billion mark in 2020, due to large portfolio deals worth $3.2 billion during the last quarter of the year. However, the year 2021 witnessed more board-based recovery with 31 deals during the first nine months as against 19 deals during the same period of 2020.
Unless some large portfolio deals are not inked at the end of the year, annual investments are expected to be in the $3.8 – 4 billion range in 2021.
Investors, apart from the office sector, also allocated fresh capital in the residential segment which staged a smart recovery, while warehousing and data centers continued to attract investments. The retail sector witnessed capital commitments through investment platforms that remain bullish on its growth prospects.
“The performance of institutional investments in Indian real estate during 2021 can be summed up in one theme – ‘increasing immunity to uncertainty.’ Investments almost doubled Year-on-Year during the first nine months of 2021 at $2.9 billion,” said Radha Dhir, CEO & Country Head, India, JLL.
According to her, listing of Real Estate Investment Trusts (REITs), distressed opportunities, asset diversification, high growth data center, and logistics segments will drive the investment momentum in 2022.
“The sector is well on its way to recovery and reaching pre-pandemic levels. While market recovery remains on track, it will not be a straight line across the asset classes, as each finds it is next to normal. The office sector is likely to clock a 30-35% Y-o-Y growth in net absorption levels in 2022 but will remain much below the highs of 2019,” said Samantak Das, Chief Economist and Head of Research & REIS (India), JLL.
He believes the residential segment is expected to reach pre-COVID quarterly sales volumes in 2022 and given the strong momentum may also match the pre-demonetization quarterly sales in the latter half of 2022.
The residential sector has witnessed green shoots of recovery and is expected to gain further momentum in 2022. Renewed buyer confidence, reduction in home loan rates, incentives & discounts by the developers have been instrumental in supporting the residential market recovery.
The buyer preference towards plotted developments and independent floors is expected to be reflected in more launches in this category. The increased demand momentum, limited inventory in select segments, and rising input costs are expected to result in a 5-7% price increase in select residential micro-markets. At a macro-level, prices are otherwise expected to remain largely stable, with the main objective of developers focused on supporting the current momentum in sales activity and driving it further.
India’s office real estate markets are expected to record 30-35% annual growth in 2022 on the back of growing traction for the tech industry in a time of increasing tech spend and digital transformation from global corporates. India’s increasing role in the innovation and R&D sphere will also drive more Global Capability Centres to set up operations even as existing ones expand on the back of India’s talent base and overall real estate costs.
Demand from other sectors such as BFSI and Consulting is also likely to show some improvement even as other sectors such as e-commerce, manufacturing, and healthcare gain more strength. Additionally, demand for managed spaces will provide a push for the continued growth of the flex space segment which is expected to account for about 15-20% of all leasing activity in 2021 and continue its strong showing in 2022 as well.
The convergence of data protection, industry-friendly regulations, the Government’s digital initiatives, and investments are going to give a structural push to the industry. This coupled with the rollout of 5G, ever-rising digital usage, increasing footprint of global DC operators and cloud players would usher in another high growth year for the Indian DC industry in 2022.
The Indian data centre industry is poised to add a record high 277 MW capacity in 2022, requiring 3.2 Mn sqft of real estate space. The immense growth will also lead to parallel trends of efficient energy usage, green energy investments, DC-ready skilled manpower, and the growth of data-driven emerging segments.
