India Market Monitor Q4 2023

The Indian economy continues to demonstrate resilience as it maintains its growth trajectory aided by a narrowing current account deficit and near-record foreign exchange reserves, among other factors. The Reserve Bank of India’s (RBI) upward revision of its FY 2023-24 GDP forecast also adds buoyancy to the overall business sentiment. In addition, record inflows are being witnessed in the financial markets by domestic and foreign investors alike. However, government and private expenditure, along with the manufacturing sector, are showing some signs of weakness.

With this backdrop, here is a review of key trends witnessed in the real estate sector in 2023:

-        Office: Led by a steady space uptake in 2023, the o­ffice market in India performed better than anticipated during the year, registering the second highest absorption figures after 2019. Additionally, improved occupier confidence led to an increase in deal closures during H2 2023, with Q4 2023 recording the highest-ever quarterly off­ice leasing activity.

-        Industrial & Logistics: Despite marginal tapering in leasing activity on a quarterly basis, the overall absorption in the I&L sector witnessed an increase in 2023 compared to the previous year. This was supported by the completion of historically high supply during the year. About 50% of this new supply was led by larger developers backed by institutional capital.

-        Retail: Robust growth witnessed in leasing and supply addition in Q4 2023; space take-up is likely to be guided by the entry of quality supply. Inflationary pressures and caution around the economic environment may have an impact on the discretionary spending of consumers in the short run.

-        Residential: The residential sector concluded the year on a decadal high with sales exceeding 322,000 units - reporting a Y-o-Y increase of about 9%. This robust sales activity stimulated developers to launch over 313,000 new housing units during 2023, marking an annual growth of about 6%.

-        Investments: Investment activity regained momentum in the second half of 2023; however, the year closed with a marginal decline in capital inflows compared to 2022. Land activity remained robust during the year, while opportunistic and core / core plus bets dominated the capital flows.

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