According to a recent study, India's super-rich individuals are investing 25% of their wealth in Commercial Real Estate, either directly or through funds and REITS, according to Knight Frank’s Attitude survey. This trend is driven by several factors that include the growing economy and the increasing demand for commercial space from businesses. Additionally, the steady growth of the Indian stock market has also led to an increase in the number of wealthy individuals looking to invest in Real Estate as a way to diversify their portfolios.
Growing demand for Commercial Real Estate
One of the reasons for the high demand for commercial real estate in India is the growing number of businesses and startups in the country. With the rise of e-commerce and the increasing number of office-based jobs, there is a growing need for commercial space to accommodate these businesses.
Additionally, the Indian Government's focus on infrastructure development and urbanization has also led to the growth of several Tier-II and Tier-III cities, which are now becoming hotspots for Commercial Real Estate development.
Rise in land prices
Another factor that has contributed to the growth of Commercial Real Estate in India is the steady increase in land prices. With the growing demand for commercial space, land prices have been on the rise, making it an attractive investment option for the country's super-rich. Respondents in the global and APAC regions, who primarily represent more mature Real Estate markets, have Commercial Real Estate exposures of 33% and 35%, respectively, through direct owners, funds, and REITs.
Real Estate is the best investment option
Real Estate was the most mentioned opportunity by 46% of Knight Frank survey respondents, whether as an inflation hedge or for its diversification. According to many panellists, a key advantage is an ability to secure enhanced return profiles. Moreover, investing directly in Real Estate gives you more control and value-add opportunities. One in ten respondents specifically mentioned looking for attractive valuations and distressed options.
Wealth growth predictions
Indian respondents expect the ultra-wealthy's money to continue growing in 2023. While 47% expect a rise of more than 10%, 53% expect a rise to be more than 10% over the past year. Only 69% of global respondents expect wealth to rise, while 14% expect it to fall. We predict a major shift in portfolio strategy, with a hunt for value opportunities in the Real Estate sector playing a much larger role than in recent years, with 69% of UHNWIs expecting wealth growth in 2023. Due to rising interest rates, downward pressure on property values has created a window for private capital, especially as we enter this new market era with record lows in the inventories of the finest property in Residential and Commercial markets.
In 2023, the preferred real estate asset avenues are office, logistics and industrial, healthcare, and development land.
Overall, the Commercial Real Estate market in India is expected to continue growing in the coming years, driven by the increasing demand from businesses and the growing number of wealthy individuals looking to invest in this sector. With the Government's focus on infrastructure development and urbanization, the Commercial Real Estate sector is likely to continue being a major contributor to the country's economy.
