Business strategy

Capital Inflows Into Real Estate Sector Jump 42% Sequentially to $3.4 billion In January-June

Capital inflows into the Indian real estate sector during January-June 2022 jumped 42 per cent sequentially and 4 per cent year-on-year to $3.4 billion. On a quarterly basis, the capital inflows April-June 2022 stood at $2 billion, an increase of 47 per cent compared to a year ago. Delhi-NCR, Chennai and Mumbai dominated the total investment quantum in Q2 2022, with a cumulative share of about 90 per cent, according to a report by leading real estate consulting firm CBRE South Asia.

The report, titled ‘India Market Monitor-Q2 2022’, said institutional investors led investment activity with a share of nearly 65 per cent, infusing liquidity primarily in brownfield (existing) assets, whereas developers (31 per cent) continued to prioritise greenfield (fresh) investments. About 70 per cent of the capital inflows were deployed for pure investment or acquisition purposes during Q2 2022, while 30 per cent were committed to development or greenfield projects.

Anshuman Magazine, chairman and CEO (India, South-East Asia, Middle East & Africa) of CBRE, said, “In 2022, real estate investments are expected to grow further on the back of a strong rebound across asset classes. With total capital inflows reaching $3.4 billion in H1 2022, we expect these investments to rise by over 10 per cent versus the 2021 benchmark. Greenfield assets are likely to witness a strong investment uptick. However, we might feel the impact of volatility in the global investments market.”

The report also highlighted the office sector’s dominance of investment activity, with a share of about 57 per cent, followed by land/development sites (30 per cent) and the retail sector (10 per cent). Foreign investors accounted for about 67 per cent of the total investment volume in Q2 2022, with investments from Canada garnering a 59 per cent share.

Gaurav Kumar and Nikhil Bhatia, managing directors for capital markets and residential business, CBRE India in a statement said, “Leading developers have raised over Rs 18,700 crore ($2.4 billion) through the QIP (qualified institutional placement) and IPO routes since FY2019 — something we expect to continue in 2022. With improved financials and stronger residential sales in 2022, we also foresee leading developers being in a much better position to negotiate with institutional investors for funds at a comparatively lower cost.”

They added that investments in alternative assets, particularly data centres, could gain further traction amid rising digitalisation and strong policy push towards a digital economy; sustainability and ESG practices would emerge as stronger themes in investment strategies.

On the outlook, the report said leasing is expected to pick up momentum going forward; space take-up would be attributable to the release of pent-up demand and expansion & consolidation requirements of occupiers. As the recovery momentum remains upbeat, differentiated and high-quality institutional supply in core markets would continue to draw flight-to-quality absorption. Flexible work patterns have increased in prevalence, but several occupiers are yet to formally define hybrid working and formulate relevant policies and guidelines. This is likely to take place over the next few quarters.

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