Change in demand. Institutional inflows into realty touched $4.9 billion in 2022: Report

Investments by institutions in real estate rose by a fifth on year to $4.9 billion in calendar 2022 led by alternate assets and office assets, data from property consultant Colliers showed.

The property consultant, however, warned that there could be a postponement in funds deployment in the current year due to slowdown in major economies such as the United States and in Europe.

While the office segment got the lion’s share of the inflows last year at 41 per cent of the total, about 18 per cent was in alternate assets such as data centres and hospitals that are seen as emerging segments. Investments in alternate assets nearly doubled on year to just under $1 billion.

“The growth of alternate sectors is led by investors looking to diversify their portfolio, given steady returns in some traditional asset classes,” Colliers said.

Data centres are becoming big business in India, driven by government initiatives on data localisation, more cloud services offerings by companies and the explosion of content online. While incumbents such as Amazon Web Services and Google Cloud are rapidly scaling up in India, domestic entrants such as the Ambanis and Adanis have also committed substantial investments into the segment.

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A breakdown

Of the total amount flowing into alternate assets, data centres accounted for over half, followed by others such as holiday homes, hospitals and life sciences.

The office segment, which is a perennial favourite with foreign private equity giants such as Blackstone and Brookfield, saw institutional inflows rise 50 per cent to nearly $2 billion, led by large deals.

Colliers said that investors are looking at building a portfolio that can bundle up as real estate investment trusts, while the greenfield and ready-to-move assets are also seeing traction.

“Majority of the deals in the office sector were driven by global investors, who are looking at income-yielding assets,” Colliers said.

Inflows into the warehousing and residential segments, however, saw a dip in the year, though there were some large transactions in these segments.

Colliers said that investments in the real estate sector is likely to grow due to the ‘structural change in demand for capital.’

“Performance credit, special situations, portfolio acquisitions, asset reconstruction, and related structures have been growing and are likely to attract more investments,” said Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India.

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