Investment in alternative assets hits $2 billion: report

Alternative assets in India have received cumulative investments of about $2 billion in the last 4-5 years (2019–H1 2023), with a major contribution from foreign investors, according to Colliers.

Foreign investments accounted for 78 per cent of the total investments in the segment, as investors continued to seek newer markets and avenues to diversify their asset portfolio, while enhancing risk-adjusted returns.

Institutional investors who were primarily focused on core asset classes, have been building up their non-core assets around data centres, life sciences, and co-living, amongst others.

Additionally, investments in alternatives have witnessed continued growth since 2019, driven by the emergence of the shared economy, increased digitalisation, and supportive government policy initiatives. During 2022, investment inflows in alternatives touched $0.9 billion, a 4.4X rise from 2019.

Further, foreign investments in the sector witnessed a 6X rise in 2022, compared to 2019. Foreign investors continue to bet on the Indian real estate market as the country remains one of the fastest-growing economies across the APAC, Europe, and the Americas, with the IMF pegging GDP at 6.6 per cent in 2023. At a time when India’s economic outlook remains sturdy amidst global challenges, the business case for alternative investments will only strengthen.

“As conventional asset classes such as office, residential, hospitality, and retail evolve with significant investor and operator penetration, the alternatives are now poised for exponential growth over the next few years. The alternative asset industry, which revolves around enhanced customer experiences, flexibility in office, residential, technology usage, and data storage, is likely to provide significant partnership opportunities to investors and operators. While core sectors continue to dominate institutional inflows in the Indian real estate sector, the share of alternatives has risen significantly from 3 per cent in 2019 to 18 per cent during 2022,” said Piyush Gupta, Managing Director, Capital Markets & Investment Services.

Since 2019, data centres have received $1 billion in institutional inflows, which have risen multi-fold in the last five years. During the period under review (2019–H1 2023), data centres accounted for about 51 per of the total investment in alternatives.

According to the report, investors are enthused by the burgeoning demand and attractive returns of the data centres and have been actively infusing funds over the last 2–3 years. Data centres in India have given promising returns of 16–18 per cent, much higher than 8–9 per cent in core office assets, which has further accelerated investors’ interest in the space.

“Global investors are increasingly allocating funds towards alternative assets, with their share in total investments rising to 75 per cent in 2022 from 55 per cent in 2019. As the market grows towards maturity, the sector will likely witness the allocation of more foreign capital, enabling investors to enter new markets and benefit through economies of scale, fostering institutional investments in the sector,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.”

Global investors have specifically favoured data centres over the last five years, accounting for over 90 per cent of the total investments in the sector during the period. Foreign investments have helped data centre operators achieve the desired scale, foray into new markets, and achieve development and operational expertise by providing access to capital. At the same time, the ‘infrastructure’ status of data centres has facilitated concessional credit availability for the development of large-scale data centres. The Data Protection Bill 2023 will further aid growth and investments in the sector.

COMMENT NOW