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The Indian real estate market is experiencing a buoyant phase, characterised by a surge in institutional investment despite global economic uncertainties. The optimistic outlook is largely due to the robust performance of key segments such as warehousing, residential and office space.Foreign investors continue to play a pivotal role, with significant contributions coming in from the Middle East, indicating their strong confidence in India’s growth potential.The first half of 2024 witnessed investment inflows of $3 billion, up 15% from a year ago, according to data from real estate consultancy Knight Frank India. Local private equity investors have also shown notable engagement, with their participation reaching levels not seen in the past decade.βInvestment appetite for foreign investors is expected to rise further given the marked resilience of the Indian rupee versus other currencies and a structural reduction in risk premium for Indian assets. Quality commercial real estate sector offers about 8-10% rental yields and the influx of global companies into India and growing domestic demand are expected to boost rental yields further,β said Vithal Suryavanshi, partner, Kotak Realty Fund.Mumbai dominated in attracting private equity investments, as inflows rose to $1.7 billion from $1.2 billion a year ago. Around 88% of the investment was made into warehousing assets, the data showed.βIndia has been favourably viewed for investments, especially in the last decade, due to economic stability and growth. While recent economic conditions and higher inflation have led funds from western economies to adopt a wait-and-see stance, Indian commercial real estate continues to thrive due to factors like return to work, rising office absorption and strengthening rental values,β Knight Frank India chairman and managing director Shishir Baijal said.Looking ahead, Baijal expects some easing of conditions in the western world that would help bring back investments from global players. This, combined with India’s growth trends, is expected to lead to increased investment activity from global funds.According to Suryavanshi, the real estate investment landscape is evolving significantly, especially in the commercial real estate sector, driven by factors like a robust economy, improved regulations and new investment avenues. India’s real estate market is likely to witness increased activity in the next few years due to high demand and a positive business environment.The warehousing sector accounted for the largest share of 52% of total private equity investments in the January-June period, followed by the residential segment at 29% and office assets at 20%.Investments in the housing sector more than tripled to $854 million during the period, while in warehousing, the inflows rose 176% to $1.53 billion, led by Mumbai and Chennai.Strong demand for warehousing due to growing manufacturing activities and consumption, coupled with supportive government policies, is making it a compelling proposition for investors.In the residential segment, investors are adopting a more diversified approach, unlike a year ago when investments were mainly directed toward under-construction projects. A significant portion of investments went into early-stage positions, reflecting the growing confidence in the sector’s future potential.
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