Indian Real Estate Capital Markets: Overview and Q1 2022 Update

A healthy pipeline of deals is expected to be concluded during the year.

May 23, 2022
  • Jitesh Karlekar
  • Bina Udeshi

The review of Institutional investment1 in India’s real estate has been closely linked with the increasing maturity of the sector as reflected by the enhanced capital flow during the last few years. The opening of the Real estate sector to foreign direct investments led to active offshore participation in the Indian real estate. However, the Global Financial Crisis (GFC) led to a sudden halt in investments. The lessons learnt from the crisis sowed the seeds for creating an enabling environment for the growth of real estate.

Apart from direct investments noted above, investment platforms/ joint ventures have also announced commitments of USD 19 billion as of end of the January-March quarter (Q1), 2022. The successful listing of three Real Estate Investment Trusts (REITs) is another leap towards maturity of the market. The listing of REITs has led to market creation, increased transparency and exit routes for investments, thereby, opening the market for more investments. The growth and the changes in trends of investments in Indian real estate have been analysed in the subsequent sections.

Platform funds gain prominence with announcements of USD 19 billion commitments
The preference of large investors for active participation in the investment process and focused asset classes has led to the rise of joint venture/club type investment platforms. The Investment Platform is a Joint Venture (JV)/Club type investment programme where all decisions are taken with the investor’s agreement. Dedicated investment platform deals/funds (which were first initiated in 2012 with the Godrej – APG platform deal in the residential segment) have come a long way with a total announcement of USD 19 billion commitments till March 2022.

79% of the total investment platforms have been raised during 2017-Q1 2022

Source: JLL Research

Warehousing platforms account for the highest share at 34%

Source: JLL Research

  • Investment platforms/joint ventures with announcements of USD 19 billion commitment have been formed during 2012-Q1 2022
  • Direct control over investments and tie-up with competent developers with proven expertise in a given asset class have been providing investors with better control of risk
  • Warehousing sector accounts for the highest share of 34% due to preference by funds for a tie-up with few competent developers for the development of new assets
  • Investors in office space have adopted development strategy in the last few years leading to platforms with leading developers for joint development
  • Incentives provided for affordable housing have led to investment tie-ups from funds with patient capital

REITs – Laying the foundation for a transparent investment market
The successful listing of India’s three REITs heralds the institutionalisation of real estate assets and indicates the increased maturity of real estate markets. While the launch of REITs symbolizes that markets have become more professional and transparent, this new investment has redefined the investment climate in India.

India’s office space offers 362 mn REIT worthy assets

Note: *REIT worthy includes all buildings which have institutional participation. For non-institutional, single ownership buildings we considered buildings with a leasable area of min. 100,000 sq ft and vacancy levels under 20%. Buildings that are lesser than 100,000 sq ft but form part of integrated developments have also been included in the analysis of REIT worthy assets.

  • India’s ~712 mn sq ft Grade-A and steady rent yielding office segment has been the sweet spot for global investors who have built asset portfolios
  • India’s office market offers a potential of 362 million sq ft that are REIT worthy across top 7 cities. This excludes the existing office space under the management of the three listed REITs
  • Bengaluru with large IT spaces occupied by prominent global players with quality asset spaces will be the most favoured for REIT. Most of these assets are singly owned by developers or large funds making it easier to aggregate the assets and manage them for REITs.
  • Chennai is an established IT/ITeS hub and offers has second largest REIT worthy office space potential. The city has 15% of REIT worthy office assets.
  • Mumbai being the financial capital comprise premium office space occupied by BFSI, media and consulting firms. The legacy office market has REIT worthy space accounting for 14% of the potential

Investment momentum grew by 41% during Q1 2022 over Q4 2021
The waning of uncertainty due to pandemic resurgence led to a pick-up in investment momentum during Q1 2022. Complete relaxation of restrictions over the quarter resulted in investors getting active. This led to the conclusion of deals worth USD 943 million during the quarter.

The headwinds created by the global geopolitical situation led to a pause in investment decisions. Q1 2022 witnessed 10 deals as compared to 16 deals during Q1 2021. However, the year has started with renewed vigour as large deals that were on hold are being actively negotiated and are likely to be concluded in the next few quarters. The Indian economy and real estate, in particular, have been partially insulated from the global headwind which is reflected in the investment momentum of Q1 2022.

The office sector leads with 52% share, while retail makes a comeback with 27% share
Q1 2022 continues to demonstrate the trend of diversified investments across asset classes. As many opportunistic deals are back in the market, office assets dominated deals with USD 492 million, translating into a 52% share of the total value transacted during the quarter. Healthy leasing momentum has brought back-office demand with investors entering JVs/ development partnerships. One of the key highlights of the quarter is higher investment registered in the retail segment with a share of 27% of total investment during the January-March quarter of 2022. Additionally, investors are actively scouting opportunities and have remained aggressive in deploying capital for warehousing assets. Investments in the residential segment declined sharply as the available options became limited.

The retail sector registers 27% growth over 2021 investments

Asset class Q1 2021 % share Q1 2022 % share
Residential 211 17% 33 3%
Office 978 78% 492 52%
Retail - 0% 251 27%
Warehousing 29 2% 94 10%
Mixed-use - 0% 73 8%
Land 42 3% - 0%
Grand Total 1260 100% 943 100%

Source: JLL Research


One of the impediments to the investments gaining pace has been continued uncertainty from new events. Though the year 2022 started with the pandemic impact receding, the emerging geopolitical issues led to volatility in global markets. The impact of rising crude and other commodity prices is likely to affect the overall economic growth. The persistent inflation trends across countries and the response of various central banks in form of rising interest rates is a factor that will play out during the year and beyond. On the other hand, investors with large dry powder intend to increase their asset allocation to the real estate sector. This will lead to increased competition for assets. Investors would use innovative strategies with diversification in new and emerging assets. Indian real estate has proved its resilience with all asset classes at various stages of recovery. A healthy pipeline of deals is expected to be concluded during the year. Apart from the traditional assets like office and retail, data centres and warehousing would remain sectors to watch out for as many hands chasing few opportunities will lead to competitive pricing.

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