Realty Sector may Surpass $5 Billion Funds Flow in 2022; Set to Recover Lost Ground Across Segments

Institutional investments in Indian real estate are likely to rebound in 2022, owing to low interest rates, continuing monetary stimulus, improved income visibility across asset classes, and inclusive growth policies.

According to a JLL India forecast, the year 2022 is likely to surpass the US$ 5 billion thresholds, which was achieved by Indian real estate annually between 2017 and 2020.

Due to major portfolio deals totalling US$ 3.2 billion in the fourth quarter of the year, institutional investments surpassed the US$ 5 billion thresholds in 2020. The year 2021, on the other hand, saw greater board-based recoveries, with 31 deals in the first nine months compared to 19 in the same period in 2020. Annual investments in 2021 are likely to be in the US$ 3.8–4 billion area, unless several big portfolio agreements are not signed before the end of the year.

Apart from the office sector, investors also put money into the residential sector, which has made a strong comeback, while warehousing and data centres have remained popular. Capital commitments were made in the retail sector through investment platforms, indicating that investors are optimistic about the industry’s growth potential.

Radha Dhir, CEO & Country Head of JJL, India stated, “The performance of institutional investments in Indian real estate during 2021 can be summed up in one theme – ‘increasing immunity to uncertainty.’ Investments almost doubled Year-on-Year during the first nine months of 2021 at US$ 2.9 billion.” Listing of Real Estate Investment Trusts (REITs), distressed possibilities, asset diversification, high-growth data centres, and logistics industries, according to her, would fuel investment momentum in 2022.

Samantak Das, Chief Economist and Head of Research & REIS (India), JLL said, “The sector is well on its way to recovery and reaching pre-pandemic levels. While market recovery remains on track, it will not be a straight line across the asset classes, as each finds it is next to normal. The office sector is likely to clock a 30-35% Y-o-Y growth in net absorption levels in 2022 but will remain much below the highs of 2019.” In 2022, he believes the residential segment will surpass pre-COVID quarterly sales sales volumes, and given the strong momentum, it may even match pre-demonetization quarterly sales in the second part of 2022. The residential sector has shown signs of recovery and is predicted to continue to grow in 2022.

More launches in this category are projected to reflect buyer desire for planned developments and autonomous floors. In select residential micro-markets, a 5-7% price increase is projected due to growing demand momentum, limited inventory in select sectors, and rising input costs. At a macro level, pricing is projected to stay mostly steady, with developers’ primary focus on maintaining and accelerating present sales activity. Because of India’s growing involvement in innovation and R&D, more Global Capability Centres will open, while current ones will expand due to the country’s talent pool and low real estate prices.

Even as other industries such as e-commerce, manufacturing, and healthcare gain momentum, demand from sectors such as BFSI and consulting is expected to improve. Furthermore, demand for managed spaces will support the sustained expansion of the flex space category, which is forecast to account for roughly 15%- 20% of all leasing activity in 2021 and maintain its robust performance in 2022.

The industry will be given a structural boost by the convergence of data protection, industry-friendly rules, the government’s digital efforts, and investments. This, combined with the implementation of 5G, rising digital demand, and expanding the footprint of global DC operators and cloud players, will lead the Indian DC sector into another high-growth year in 2022.

In 2022, the Indian data centre sector is expected to build a record-breaking 277 MW of capacity, requiring 3.2 million square feet of real estate space. Parallel trends of efficient energy usage, renewable energy investments, DC-ready skilled people, and the expansion of data-driven emergent industries will result from the enormous growth.