Institutional investments in Indian real estate to increase by 14.6% in 2021: Report

NEW DELHI: Institutional investments in Indian real estate will grow by 14.6% to Rs 396 billion from Rs 346 billion in 2020, according to a recent report by Colliers International India. Institutional investments in 2020 had witnessed a drop of 23% from 2019.

“The investment climate in India is very buoyant with global investors’ interest in real assets getting stronger. With global interest rates at historic lows and positive net yields in India, the country has emerged among the preferred destinations for investments in real estate,” said Piyush Gupta, managing director, Capital Markets & Investment Services (India) of the company.

Commercial office assets accounted for over 55% of total Indian real estate inflows between 2018 and 2020, showing the higher appetite of investors. Between 2018 and 2020, an average annual supply of over 35 million sq ft entered the top six Indian cities ie. Bengaluru, Chennai, Delhi NCR, Hyderabad, Mumbai and Pune, with the majority being snapped up by institutional investors.

Even though a similar level of supply is set to enter the market, some investment firms are increasingly looking towards developing their own greenfield office assets. Investors remain bullish on the long-term prospects even as they target an internal rate of return (IRR) of about 17-18%.

“Whilst 2021 may be a year of consolidation and portfolio optimization for occupiers of commercial offices, they will return to growth as confidence in economy increases vis-à-vis the roll-out of COVID-10 vaccines,” said Siddhart Goel, senior director & head (Research) of the company.