Rising tension between India and Canada may impact Indian Real Estate adversely

Impact of Indo - Canada Tension on Indian Real Estate

Tensions between Canada and India have escalated after Canadian Prime Minister Justin Trudeau alleged that Indian agents may have been involved in the killing of Hardeep Singh Nijjar, a pro-Khalistan extremist and a declared terrorist by the Indian Government. This could hurt business between the two countries. The real estate market in India might not witness an immediate fluctuation, but a prolonged deadlock between the two nations will have consequences in the future.

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 financial institutions, including its retirement planning body, are working with Indian companies to develop large office parks in multiple cities. In 2022, joint ventures totaling over $1.1 billion were established, with the Canada Pension Plan Investment Board investing $0.35 billion in RMZ and $0.32 billion in Tata Realty. Brookfield, a Toronto-based real estate subsidiary, invested $0.32 billion in Bharti Realty, a division of Bharti Enterprises.

Investments from Canada and the US made up over half of the foreign inflows to India in 2022 and the first half of 2023, with a total investment of $1.6 billion in 2022 and $1.4 billion in the first half of 2023. The majority of the funds went towards office assets, followed by alternative assets.

Canada accounted for 34% of the total funds invested in India in 2022, while the US accounted for 18%.

Investors from North America and other countries in Asia-Pacific, like Singapore and Hong Kong, are investing more in Indian real estate. In the first half of 2023, institutional investment in the Indian real estate sector went up by 43 percent, reaching $3.7 billion. The office segment was the most popular, with $1.9 billion invested. Investors are now also looking at flex office spaces, which are shared workspaces, instead of traditional office spaces. India absorbed 57 million square feet of office space in 2022, and that number is expected to rise to about 45 million square feet in FY24. Flex office space made up 7 million square feet of that total and is expected to increase to at least 12 million square feet this year. In the first two quarters of CY2023, the commercial real estate market in India was affected by global issues after the collapse of Silicon Valley Bank in the US. The Grade A office space segment showed signs of a slowdown because investors were delaying their decisions or the costs were too high.

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