Foreign investments in alternate real estate assets jump 6X in four years

• Data centres, co-living spaces along with other alternate real estate assets are seeing steady institutional inflows for four years, says Colliers.
• India’s economic outlook is sturdy and the business case for alternative investments will only strengthen, it adds.
• Data centres see almost half of all the institutional inflows into alternate assets.
  

Indian alternate real estate assets like co-living spaces, data centres and more have been attracting domestic as well as foreign capital, along with conventional sectors like residential and office spaces. As of the first half of 2023, as much as $158 million was investment into such assets, says a report by Colliers.

The breakout year for investments into these assets was 2022 when it touched $900 million. The key driver to this growth was foreign investments which rose six times last year as compared to 2019.

India’s GDP is pegged to grow at 6.6% in 2023 as per IMF and the report adds that at such a time when India’s economic outlook remains sturdy amidst global challenges, the business case for alternative investments will only strengthen.

“While core sectors continue to dominate the institutional inflows in the Indian real estate sector, the share of alternatives has risen significantly from 3% in 2019, to 18% during 2022,” said Piyush Gupta, managing director of capital markets & investment services at Colliers.

The billion dollar investment idea

Since 2019, data centers have received $1 billion of institutional inflows, with inflows rising multi-fold in the last five years. During the period under review (2019- H1 2023), data centres accounted for about 51% share in the total investments in alternatives, the report said.

“India's data centre market is experiencing rapid growth, fuelled by a remarkable surge in virtualisation, e-commerce, cloud computing, and the prolific generation of public data. As the world's second-fastest-growing digital economy, India is set to witness the IT & Communication sector's doubling by 2025, contributing approximately $400 billion to the Indian GDP,” said Amit Sarin, MD at Anant Raj, a real estate developer.

The Government of India has recently enacted the Data Protection Bill to ensure protection of data and this has further boosted the demand for data centres, say experts.

Data centres are also witnessing large platform deals between developers and investors who are looking to grow their businesses multi-fold. In May 2023, Lumina CloudInfra, a data centre platform owned and managed by Blackstone’s Real Estate and Tactical Opportunities funds, announced its plan to invest more than $300 million to develop a hyperscale data centre campus in Navi Mumbai.

Reliance Industries also partnered with Brookfield Infrastructure and Digital Realty for developing data centres in select locations in India.

Co-living — an emerging sector

Other alternative asset classes such as life sciences, co-living have also seen increased traction, Colliers say. Alternate assets also include senior housing, holiday homes, student housing and co-living properties.

The co-living sector in India too saw expansion during Covid-19 pandemic. “This growth has led to increased organisation within the sector, with only committed and reputable players remaining in the business. The demand for co-living accommodations continues to surge nationwide, indicating a promising outlook,” said Sunny Garg, co-founder & CEO, Crib, a SaaS-based property management solution provider.

Co-living also offers higher rental returns compared to traditional rental arrangements, making it an enticing prospect for institutional investors, Garg adds. The trend is also going beyond metros, experts say.

“This demand is emerging in tier II cities as well. To meet this growing demand, we have strategic plans to expand our facilities into tier II cities like Ahmedabad,” said Abhishek Tripathi, co-founder, Settl, a co-living space developer.