1. ECONOMIC OVERVIEW: GDP growth in FY23 beats estimates; domestic economy resilient
As of the quarter that ended in March 2023, India's real GDP rose by 6.1% year over year, compared to 4.4% growth in the preceding quarter and 4.1% growth during the same period the previous year. The GDP grew by 7.2% overall in FY-23, exceeding market expectations. Due to high rates of inflation, the private sector's consumption saw subdued development, while the services sector—which included the rise of trade, transportation, and lodging—led economic growth. Building on a 4.5% year-over-year expansion, the manufacturing sector also contributed to the quarterly rise. As compared to FY-23, inflation is predicted to decline in FY-24, which is good news for the outlook for household consumption. The RBI projects the GDP to grow by 6.5% in the current fiscal year (2023–24). the government's.
2. INVESTMENT OVERVIEW: Robust quarterly PE inflows; Office sector regains the lead
INR 158.5 billion (USD 1.92 billion) was the amount of investment activity reported in Q2 that was 63% more than the previous quarter's activity and 60% more than the activity recorded in Q2-22. With the acquisition of operational assets in Hyderabad, Mumbai, and Delhi NCR accounting for about 65% of the total quarterly PE flows, the office segment reclaimed its title as the "most preferred asset class." Large, mature office assets in these locations with a single owner are the focus of these purchases. Nearly 84% of the investment flows were made by foreign investors, with the majority coming from institutions based in Singapore, Canada, and the USA. In Q2-23, Nexus Select Trust, India's first retail REIT, went public. It raised over USD 390 million (INR 32 billion) from the sale of its shares in May 2023.
3. Fund-raising activity limited in Q2, H2-23 to witness office focused fundraise
A total of USD 304 million was raised in the second quarter, with a focus on the residential and L&I sectors. A total of USD 912 billion in fundraising initiatives aimed at the office sector were revealed throughout the quarter. Two significant institutional players that intend to concentrate on expanding their current commercial asset portfolio in the next years are primarily responsible for this. A major portion of the USD 30.4 billion financing round, which was announced by a well-known international real estate investment firm, is anticipated to be invested in the logistics and data centre industry in the Asia-Pacific area, particularly in India.
4. Office REIT and InvITs expected this year
By the end of the year, a new office REIT with a total of 45 million square feet is anticipated, created by a group of well-known asset owners, following the triumphant listing of India's first retail REIT. Delhi NCR-based NDR Warehousing is listing its approximately 19 million square foot portfolio across India in order to evaluate their first INR 2,000 Cr InvIT.
5. Corporate Transactions in Real Estate
Corporate transaction volumes for the quarter totaled INR 21.4 bn (USD 260 million), over twice as much on a quarter-over-quarter and year-over-year basis. The average deal size increased to INR 129 million from INR 89 million in Q1 2023, which was a major contributing factor. In 2022, there were quarterly average investments of INR 146.3 Mn over 347 projects, or 87 deals every quarter. This quarter's top two cities for the percentage of all corporate space occupied are Mumbai (46%) and Pune (31%).
Outlook
India’s economy is projected to grow at 6.5% according to the latest RBI forecast, and inflation is likely to come down to RBI’s comfort band. However, the global macroeconomic situation continues to be subdued. However, India continues to show resilience. PE inflows during the first half of the year came in at USD 2.99 bn, which is higher than the same period from the previous year but still lower than that seen in the same period in 2019 and 2021. Limited availability of quality assets in the commercial office and retail segments results in subdue quarterly inflows. However, many institutional players active in Indian real estate have aligned their fund-raising efforts recently which is expected to drive the demand for quality assets in the near team.
