The real estate market has emerged as the most preferred market for global investors in Asia-Pacific

According to Colliers’ APAC Trends Investor Outlook 2023, India’s real estate market has emerged as the most preferred destination for global investors in the Asia-Pacific region, generating over US$ 23 billion since 2018, which accounts for 77% of the total investments during this period.

According to Colliers data, institutional real estate investment surged by 27% year over year in the first nine months of 2023, with a notable increase in purchases aimed at the residential and industrial sectors. The firm claims that there is a close correlation between this rise and the growth trajectory of the nation.

Mr. Vimal Nadar, Senior Director and Head of Research of Colliers India, stated that India is becoming more and more popular among growth markets in the Asia-Pacific region due to its solid real estate demand, enhanced regulatory environment, and excellent economic performance. Throughout 2018, foreign investors have demonstrated a constant preference for the Indian real estate industry, contributing over US$ 23 billion, or 77% of all investments made during this time.

He further noted that the US remains the top investor, contributing about 44% of the foreign inflows, followed by Canada and APAC at 25% share each. The Canada-based management firm expects India to remain one of the world’s fastest-growing major economies, led by private consumption and capital formation.

From the perspective of global and APAC investors, the Indian real estate market currently offers stable returns mixed with attractive pricing, better valuation, and higher yields.

Mr. Vimal Nadar also stated that over the coming quarters, foreign investors are probably going to stay bullish on the Indian market because of the ongoing reversal of the interest cycle and the widening yield differential between bonds and real estate, which makes real estate an appealing investment.

The report also stated that institutional investors are specifically capitalising on India’s data centre growth, sparked by the stable income, higher yields, and supportive regulatory framework of this asset class, which has infused US$ 1.1 billion since 2020. India is quickly becoming a popular destination for data centres; according to the corporation, US$ 10 billion in investments might be made in the country's sector in only the next three years.

As to the research, institutional investors in India are still placing their bets on the office sector due to the availability of REITs as exit methods, healthy growth prospects, persistent demand, and expanded opportunities. Institutional investments in office assets increased by 1.6 times year over year to US$ 2.9 billion in 2023, making up around 63% of all inflows for the first nine months of this year. 

Domestic investors have increased their market activity, even as foreign investors continue to dominate fundraising activities with greater participation in entity-led agreements.

Mr. Chris Pilgrim, Managing Director of Global Capital Markets, Asia-Pacific, mentioned that India has been the net beneficiary of many foreign funds looking to invest in large markets in the area; especially in the office and logistics sectors, it has developed into a highly institutional market controlled by capital from Singapore and Canada.

Colliers predicts a stronger 2024 than 2023, with a lot of pent-up equity searching for a place to call home.  The research stated that investors are aware of the development opportunities in rapidly expanding nations like South Korea and India, as well as the asset class's durability, particularly within the APAC region. 

Interestingly, Colliers APAC Outlook is based on a poll of over 900 real estate investors in October and November 2023, more than 400 of whom were from Asia Pacific, and a series of interviews with key Colliers specialists.

The results of the poll indicate that a growing number of investors intend to increase their real estate allocations. Nearly 60% of investors in Asia-Pacific believe that robust regional economic growth will benefit the real estate industry. 

According to survey data, investors are aiming to increase their real estate allocations. Specifically, 75% of respondents said they would allocate 5–20% of their managed assets to real estate in the future, up from 64% at present.

The report also emphasised how environmental, social, and governance (ESG) goals are becoming more widely known. The report also stated that Indian investors have begun developing ESG strategies that are in line with their long-term ESG goals as occupiers and investors throughout the world have come to recognise the importance of ESG.  

The research stated that investors have begun to monitor and report on their environmental effects as part of their due diligence and asset management efforts, albeit at an embryonic stage, with the goal of long-term resilience and company success.

Office assets specifically, as per the report, have seen increased adoption of green certifications, owing to rising demand for green buildings and higher rental premiums compared to other asset classes.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.