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Increasing institutional investment in the Delhi NCR office sector

July 6, 2022 / By  

Delhi NCR has always been a vibrant location for the office market with well-established submarkets and corridors, Gurgaon and Noida, leading infrastructure development. The region has emerged as a top location for multinationals, with Gurgaon housing most of the Fortune 500 companies, enabling the area to stand out as one of the major start-up hubs of the country.

Delhi NCR has a total Grade A stock of 137 million sq. ft. (as of 1Q 2022), with an additional 67 million sq. ft. in the pipeline in the coming five years (2022-2027). The year 2021 alone saw an addition of 8.5 million sq. ft. of Grade A stock. With the office market recovering post-Covid and leasing activity gaining momentum, the market has witnessed strong demand from IT/ITes, BFSI and healthcare. The presence of quality stock with significant demand from occupiers makes it a viable investment option for institutions. At the same time, it allows developers to partially exit the project and reduce their debt, focusing on new developments.

With institutional investment growing more assertive in India, the Delhi NCR office sector has also witnessed substantial growth, with a total inflow recorded at USD 169 million in 2021. Out of the 137 million sq. ft. of total supply, 40 million sq. ft. has the presence of institutional funds.

2022 started well, witnessing some significant transactions, with prominent funds investing in the office sector., such as Brookfield Properties acquired stakes in three properties of Bharti Realty in Delhi and Gurgaon, consisting of 2.37 million sq. ft. of Grade A office space. Similarly, the Canada Pension Plan Investment Board acquired a stake in Tata Realty and Infrastructure Ltd.’s Intellion Edge consisting of 1.6 million sq. ft. of Grade A office space.

What are investors looking for?

  • Grade A development – Quality specifications and professionally managed facilities ensuring high standards
  • Leased over strata – Lease-based buildings over strata sold properties will ensure fair market rentals
  • Prominent developer – Developers of repute with quality supply allowing a higher RoI
  • Green-rated development – Promoting sustainability and ensuring efficiency
  • Low or no vacancy – A building either fully occupied or with a marginal vacancy to provide proper and timely returns

Investors creating REITable stock

Still relatively new to India, the first REIT was listed just three years back in 2019. The office sector dominates the majority of Indian REIT stocks. With three successful REITs (Mindspace, Brookfield, and Embassy REITs) in India, Delhi NCR’s top real estate developer DLF is gearing to launch its REIT in the near future.

Close to 13.3 million sq. ft. of office stock in NCR is part of the Indian REIT stock, as investors are creating portfolios of REITable stock. Currently, the city has around 52.8 million sq. ft. of REITable stock.

With infrastructure development, improved facilities and a supply of quality office space, the Delhi NCR is expected to grow phenomenally, attracting global institutional investors.

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