The investment activity during the quarter was driven by some large-sized deals in the office sector.

Reopening of the economy post the third wave of Covid-19 pandemic and an improvement in investors’ sentiment has led to institutional investments into the real estate sector touching $1.1 billion during Q1 2022, which is double compared ($0.5 billion) to the same period last year, an analysis by Colliers has said.

The investment activity during the quarter was driven by some large-sized deals in the office sector, Colliers added.

The office market has made a comeback in terms of investments, with occupiers continuing to see it as a stable income-accruing asset class. Moreover, the office market is now recovering with Q1 2022 seeing stable vacancies for the first time in two years.

The retail sector attracted the second-highest share of investments at 23%, backed by one major transaction. Investment in the retail sector was the highest since the start of the pandemic. Global investors continue to show strong interest in under construction as well as stabilized retail assets, as they are expecting a revival, it said.

Industrial and logistics assets received inflows of $0.2 billion, accounting for about 16 percent of total investments. Investor appetite for industrial and logistics assets remained robust backed by strong structural demand from e-commerce and 3PL firms. Investors continued to scout for land parcels for in-city warehouses and in the peripheral locations of larger markets. Heightened investment activity is seen on the back of strong demand for modern industrial and logistics assets coupled with a shortage in supply.

“Multi-city deals accounted for 65 percent of the total investments in Q1 2022 as investors laid focus on entering into strategic alliances with leading developers and on acquiring/developing portfolios across multiple cities. We are also seeing the creation of platforms for investment in specific asset classes, especially across the commercial office and industrial asset classes”, said Vimal Nadar, Senior Director and Head of Research, Colliers India.

Investments in the residential sector remained muted attracting only $15 million in Q1 2022, just about 1 percent of the total investments. However, Colliers expects investment momentum to increase over the next few quarters as domestics investors remain bullish on the sector and are actively raising funds.

The residential sector is witnessing tailwinds amid a significant rebound in sales momentum after a turbulent spell since the NBFC crisis in 2018, followed by the pandemic. In Q1 2022, a major investment group marked the close of an affordable housing fund, one of the largest funds targeted towards residential real estate in India.

Investments in data centres continued to grow in Q1 2022 to about $40 million, as global data centre REITs, data centre management firms and hyper scalers continued to invest in India.

Chennai is witnessing significant traction in data center development and has the potential to emerge as a  key data centre hub in South Asia due to its strategic location as submarine cables landing station. Investment opportunities in data centres are surging, given the huge growth in demand for cloud computing from enterprises, deeper internet penetration, and infrastructure status granted to data centres, the analysis added. 

Investments were largely driven by foreign investors that accounted for about 70 percent of the inflows during the quarter. Interestingly, after a drop in 2020, the share of domestic investments has reached 30 percent, almost the same as pre-pandemic levels. This shows a resurgence in the confidence of domestic investors, the analysis said.

The top three asset classes in the first quarter of 2022 included office, retail, industrial and logistics with 95 percent share.

"Real estate sector has undergone positive structural changes and performance indicators reflect strong come back across residential, office, industrial, logistics sectors, with newer themes around technology and digital clearly emerging. Investors, both domestic and global are appearing bullish on Indian real estate supported by pro-growth government policies with a long-term view to develop and hold assets. From a city level, Mumbai continues to be the market leader with a share of 25 percent in total investment inflows. This shows immense confidence of investors in the sector,” said Piyush Gupta, Managing Director, Capital Markets & Investment Services, Colliers India.