Investor Interest Surges in Indian Real Estate as Warehousing and Smallcaps Lead Growth

 

India’s real estate sector is witnessing renewed investor enthusiasm, with capital market inflows exceeding Rs 26,000 crore in the past year, according to the latest Real Estate Tracker report by Equirus Capital. This surge is being driven by a robust warehousing boom, shifting investor preferences, and supportive government policies.

 

Real Estate Investment Trusts (REITs) continue to dominate capital-raising activity in the sector. Since FY18, REITs have mobilised over Rs 31,000 crore representing 43% of the total Rs 72,331 crore raised. While they remain attractive for their structured yield offerings, REITs delivered 15.2% returns in the past year, slightly underperforming smallcap real estate stocks.

 

Smallcap developers outshone their larger peers, delivering 17% returns over the last 12 months. In comparison, midcaps returned a modest 2.5%, and largecaps recorded a negative return of -2.9%. By contrast, the Sensex posted a gain of just 1.4% during the same period. This trend, Equirus notes, has been consistent since March 2021, with smallcaps consistently outperforming.

 

The warehousing segment has emerged as one of the real estate sector’s strongest growth drivers. Total warehousing stock reached 533 million sq. ft. in 2024, up from 300 million sq. ft. in 2019-a 78% increase. Notably, Tier 2 and Tier 3 cities contributed 95 million sq. ft., or 18% of the total warehousing stock, marking a fourfold rise since 2017.

 

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E-commerce continues to fuel this expansion, accounting for 60% of the incremental absorption. Government initiatives such as the Gati Shakti plan, GST reforms, Dedicated Freight Corridors, and the Urban Infrastructure Development Fund have further propelled sectoral growth.

 

Additionally, the market is evolving in terms of quality. Grade A warehouses made up 80% of new absorption in Tier 1 cities and around 30% in emerging hubs, indicating a clear move toward compliance-driven, high-standard spaces.

 

With steady capital flowing into REITs and smallcap developers delivering market-leading returns, institutional investors remain bullish. Backed by policy support and high demand, India’s warehousing segment is poised to remain a vital engine of real estate growth.