Institutional Investment Trends in Indian Real Estate (2024)

Posted On - 9 January, 2025 • By - Prasanna Katkam

Introduction

The year 2024 has been a watershed moment for Indian real estate, with record institutional investments amounting to $8.8 billion, an increase of 51% over 2023. This performance not only eclipsed the previous high of $8.4 billion in 2007 but also reflected a paradigm shift in investment patterns across asset classes, signalling renewed confidence in the sector. According to the JLL report, the sector is showing its strength against global economic headwinds, driven by the residential sector and rising equity participation.  

Investment Trends

It marked a turning point in the preference of asset classes. The residential sector was the standout performer, taking 45% of total institutional inflows, a dramatic fourfold increase from the previous year. With $4 billion spread across 49 deals, domestic investors led the charge, favouring residential assets for their potential to deliver higher returns and capital appreciation. This shift was accompanied by a notable rise in equity contributions, which accounted for 54% of total residential investments, compared to the debt-dominated funding of 2023. 

Where this saw an overall decline of 17%, office buildings remained a relatively strong market segment compared to others, even within their specific group. Thus, this still managed to draw $2.5 billion worth of investment, largely focused on core assets that constituted 61% of the transactions tied to offices. 

Industrial warehousing properties comprised a significant 23%, reaffirming industrial and logistic space’s place in Indian investments. 

Funding Dynamics

Qualified Institutional Placements (QIPs) have been a game-changer in 2024, making up 57% of the overall residential investment volume. It reflects the shifting funding mechanisms in Indian real estate. Foreign institutional investors continued to lead the way, accounting for 63% of the total inflows, while domestic investors gained ground, taking up 37% of the total inflows, up from an average of 19% over the past four years (2019-2022). REITs also saw a spurt, garnering $800 million in investments, three times the amount raised in 2023. 

Deal Activity

Deal activity picked up significantly with a 47% growth in the number of deals compared to the previous year. $2.4 billion of platform commitments were announced, slated for phased-in deployment over the next 3-5 years. This significant activity speaks to increasing investor confidence and a long-term commitment to India’s real estate growth story. 

Significance

The stellar performance of the Indian real estate sector in 2024 underlines several key factors: 

  • Increased Investor Confidence: The rising equity participation and domestic investment reflect a healthy capital appreciation and return on investment outlook. 
  • Asset Preferences: A shift toward residential properties along with continued investment in warehousing suggests an evolving investment landscape in response to market requirements. 
  • Increased Market Transparency: Reforms initiated by the government to enhance accountability have enhanced foreign and domestic investor confidence. 

Necessity

Institutional investments in real estate cannot be overstated. Inflows are essential for: 

  • Infrastructure Development: Capital infusions make possible large-scale projects addressing housing, office space, and logistics needs. 
  • Economic Growth: The sector’s performance is interlinked with job creation, urban development, and GDP growth. 
  • Global Competitiveness: Strong investment activity positions India as a key player in the global real estate market, attracting diverse capital sources even in the face of global uncertainties. 

Conclusion

The year 2024 has redefined the contours of institutional investments in Indian real estate. With record-breaking inflows, a pronounced shift towards residential properties, and increasing domestic participation, the sector stands as a beacon of resilience and growth. As transparency and accountability continue to improve, coupled with innovative funding mechanisms like QIPs and REITs, the Indian real estate market is poised for sustained growth in the coming years. Such investors, domestic and international alike, will have a potential landscape in which to place their money.