Already simmering tensions flared following Canadian Prime Minister Justin Trudeau's allegation of the "potential" involvement of Indian agents in the killing of pro-Khalistan extremist Hardeep Singh Nijjar, 45, on his country’s soil on June 18 in British Columbia.

This has led to fears of a knock-on effect on various spheres of business where the two countries intersect. When it comes to the real estate sector, experts say that while the distinct chill in bilateral relations is unlikely to dent the domestic market, there could be an impact if the situation is prolonged.

 
Sankey Prasad, chairman and managing director of Colliers India, the local arm of the Toronto-based property consultancy, explained that foreign direct investments (FDI) in Indian real estate is about 4 percent of the total inflow, with domestic investors playing a significantly larger role. However, he noted that over the past few years, Indian and Canadian companies have closed several real estate deals.

Canadian funds boost Indian real estate

Canadian funds, particularly its huge retirement planning body, continue to partner with Indian companies to develop large office parks across multiple cities. According to data from Colliers, over $1.1 billion of joint ventures were closed in 2022.

 

These include the Canada Pension Plan Investment Board, a Canadian crown corporation, investing $0.35 billion and $0.32 billion, respectively, in domestic real estate companies RMZ and Tata Realty. Additionally, the Toronto-based real estate subsidiary of alternative investment management giant Brookfield put $0.32 billion into Bharti Realty, a division of the telecom-focused but diversified Bharti Enterprises.

"Investments from the US and Canada continued to remain significant during 2022 and in the first half of 2023 as well, accounting for over half of the total foreign inflows during the period," Prasad added.,

The majority of the funds were allocated towards office assets, followed a long way behind by alternative assets.

 

Total foreign investments by Canada and the US in 2022 stood at $1.6 billion in 2022, accounting for 52 percent of the total foreign inflows. In H1 2022, India saw $1.4 billion of foreign inflows from both nations, accounting for 60 percent of total foreign funds.

However, the data also pointed out that of the total inflow in 2022, Canada accounted for 34 percent of the total funds while the share of the US stood at 18 percent.

Despite global headwinds, investments remain robust

Prasad added that apart from North America, there is increased investor interest from other Asia-Pacific (APAC) countries such as Singapore and Hong Kong, which are also exploring options and infusing funds into Indian real estate.

Institutional investment inflows into the Indian real estate sector saw a 43 percent surge yearly, reaching $3.7 billion in the first half of 2023, with the office segment leading the way with $1.9 billion.

"Interestingly, compared to last year, we see investors eyeing flex office spaces for the first time. While in 2022 the gross office space witnessed 57 msf (million square feet) of absorption in India, in FY24, may go up to about 45 msf," Prasad said.

In total office absorption, India saw 7 msf of flex office space being launched. The share of flex office space is likely to increase to at least 12 msf this year, the highest ever till now, he added.

In the first two quarters of CY2023, global headwinds following the collapse of Silicon Valley Bank in the US dented the commercial real estate market in India. The Grade A office space segment showed skewed signs of slowdown due to investors delaying their decisions or the high capex involved.

 

 

Source credit: Money Control