In 2024, foreign investors emerged as dominant players in the institutional investment landscape, commanding a substantial 54% share, translating to USD 3.7 billion. This marks a notable decline from their 65% share in 2023; however, the overall value of investments surged by 36%. Domestic investors also experienced a reduction in their market share, dipping from 35% in 2023 to 30% in 2024, yet they too saw a similar 36% increase in investment value during this timeframe. A significant trend observed in 2024 is the rise of co-investments, where foreign investors leaned on the local expertise of domestic firms amidst ongoing macroeconomic uncertainties. Impressively, co-investments accounted for 16% of total investments, reflecting a staggering 61-fold increase in value. According to Vestian Research, total institutional investments reached USD 6.8 billion, marking a remarkable annual increase of 61%. This resurgence follows four consecutive years of decline, primarily fueled by a substantial influx of funds into the industrial and warehousing sectors, spurred by the burgeoning demand for e-commerce and quick commerce services across India.
Sector Performance: Industrial, Warehousing, and Commercial Assets
Despite the surge in investments within the industrial and warehousing sectors, commercial assets continued to hold a significant market position, accounting for 35% of total investments in 2024. However, this share represents a steep decline from 61% in 2023, primarily due to a global slowdown affecting the IT-ITeS sector. As the demand for Global Capability Centers (GCCs) grows in India, there is an optimistic outlook for renewed demand in office spaces. The residential real estate sector also demonstrated robust performance, with investments amounting to USD 2.0 billion, constituting 30% of total investments. This sector witnessed a remarkable 171% increase in funding compared to the previous year. Concurrently, the industrial and warehousing sector registered a staggering 203% annual increase, elevating its share from 15% in 2023 to 28% in 2024. This growth trajectory indicates a shifting preference among investors, highlighting the evolving dynamics within the real estate market.
In a statement, Shrinivas Rao, CEO of Vestian, acknowledged the significant turnaround in the real estate sector, noting that institutional investments in 2024 surpassed pre-pandemic levels. However, he cautioned that 2025 may present challenges due to escalating geopolitical tensions, a deceleration in global economic growth, and persistently high inflation rates. On a positive note, the Reserve Bank of India (RBI) is expected to lower the repo rate in 2025, potentially invigorating the real estate sector. The anticipation of heightened real estate activities driven by lower mortgage rates could further attract more investors, stimulating growth in the market.
Future Outlook: Trends and Opportunities in Real Estate
Various factors are set to influence the real estate landscape in the coming years. Return-to-office policies implemented by companies are likely to drive demand for commercial spaces, especially as hybrid work models gain traction. Additionally, government initiatives, such as the Production Linked Incentive (PLI) scheme, are expected to bolster manufacturing sectors, indirectly benefiting the real estate market. Furthermore, an increased emphasis on affordable housing could attract a broader range of investors, enhancing participation in the sector. As the market adapts to these changes, investor confidence may strengthen, leading to a more vibrant and diverse real estate environment. The combination of favorable economic policies, evolving work paradigms, and changing consumer demands will play a pivotal role in shaping the future of real estate investment in India.
In conclusion, the institutional investment landscape in 2024 showcased significant growth and adaptability amidst challenges. The trends observed highlight a robust recovery trajectory for the real estate sector.
