Domestic investors will likely remain cautious during the first half of 2023 and look to diversify their portfolios, Prasad said, adding India will probably see strong growth prospects even as the APAC region markets undergo quick repricing leading to better valuations.
“The year 2023 is also likely to witness more institutional investors forming strategic partnerships to expand their office portfolios in India, given the sector’s strong growth prospects and attract more investments in 2023,” Prasad told ET.
According to Colliers, investment activity in the global markets remained subdued relative to previous years in the first quarter of 2023. However, the India investment sentiment remains promising, led by investors’ continued interest in core assets.
In Q1 2023, institutional investments in the Indian real estate market remained strong, totalling $1.7 billion, with the office sector leading the way and providing an optimistic outlook for the year ahead. During Q1 2023, investments in alternative assets rose 4x compared to the same period last year.
“Despite these challenges, the real estate sector is expecmted to remain resilient in 2023, particularly in the latter half of the year. In a scenario wherein the external factors do not have a prolonged and a significant impact; the office sector is likely to witness 35-38 million sq ft of office leasing during 2023,” he said.
The Indian property market has seen large institutional investors like CPPIB, Ivanhoe Cambridge and ADIA forming strategic partnerships to expand their office portfolios in India, given the sector’s strong growth prospects. Across the APAC region, markets are undergoing a quick repricing leading to better valuations.
“Gateway markets with safe-haven status and deep levels of private capital are likely to thrive in this environment. Businesses are realigning plans, and investors are sharpening strategies to pick the right markets and assets for strong returns this year,” Prasad said.
According to Colliers’ APAC cap (capitalisation) rates Q4 2022 report, Bengaluru and Mumbai occupy the second and third positions, respectively, in terms of commercial yield across APAC. Bengaluru leads in office yields at 8.25%-8.75% and retail yields at 9.5%-10.75%, while Mumbai leads in industrial assets at 8.0%-9.5% yields. During 2023, apart from the income-yielding office assets, asset classes such as residential, industrial warehousing, and data centres will witness some significant transactions.
