The meetings, held from January 13-14, 2025, brought together Minister Rajeev and top UAE officials, including UAE Minister of Investment Mohamed Hassan Al Suwaidi and Ahmed Jasim Al Zaabi, Chairman of the Abu Dhabi Chamber of Commerce. These discussions proved fruitful, with the UAE confirming its commitment to the event by sending a special delegation to Kerala for the summit. The UAE’s strong support signals a new chapter in bilateral trade and investment between Kerala and the Gulf nation.

Strategic Areas of Collaboration

The meetings focused on areas of mutual interest, with Minister Suwaidi expressing particular interest in Kerala’s burgeoning logistics and food processing sectors. The UAE has seen its investments diversify across various industries, and Kerala’s established strengths in these sectors made it an attractive destination for capital inflows. To further assess potential investment opportunities, the Abu Dhabi Chamber of Commerce also announced plans to send officials to Kerala for preliminary site evaluations ahead of the IKGS.

The discussions underscored Kerala’s readiness to embrace international investment, as the state continues to evolve as a crucial player in India’s economic landscape.

Ambassador’s Remarks on Kerala’s Strategic Position

During the investor roadshow at Taj Dubai, Indian Ambassador to the UAE, Shri Sunjay Sudhir, highlighted the unique strategic position of Kerala in Indo-UAE relations. “Kerala stands out in the trade connection. From humble beginnings, we have reached a stage where India is the UAE’s second-largest trading partner,” Ambassador Sudhir noted. He further underscored the growing economic importance of the UAE’s capital, stating that Abu Dhabi has emerged as the “capital of capital” with its sovereign wealth fund assets surpassing those of many other global financial hubs.

Minister Rajeev’s Vision for Kerala’s Industrial Future

Minister Rajeev took the opportunity to address potential investors and challenge misconceptions about Kerala’s industrial landscape. He emphasized the state’s remarkable contributions to India’s economy, despite its relatively small geographic and demographic footprint. “Despite occupying just 1.16% of India’s land area and 2.8% of its population, Kerala contributes a remarkable 4% to the national GDP,” he pointed out, bolstered by compelling statistics about the state’s diverse industrial achievements.

The minister also spotlighted Kerala’s leadership in the medical device industry, revealing that the state accounts for 24% of India’s total medical device industry turnover and 17% of medical device products. This data demonstrates Kerala’s significant role in the healthcare sector, both domestically and globally.

Technological Innovation at Kerala’s Core

In addition to its industrial prowess, Minister Rajeev highlighted Kerala’s pioneering role in technology. He drew attention to the state’s long history of technological leadership, citing the establishment of Keltron in 1973 – India’s first public-sector electronics company – and Technopark in 1993, which remains the country’s first and largest technology park.

Today, Kerala’s technological expertise continues to shape India’s future, with Keltron managing cutting-edge AI-based traffic control systems for National Highways and smart city projects across the country. These achievements underscore Kerala’s robust infrastructure in technology, making it an attractive destination for both domestic and foreign investors.

Looking Ahead to the Global Summit

With strong backing from the UAE’s business and government leaders, the upcoming Invest Kerala Global Summit is poised to be a landmark event in the state’s investment journey. The summit promises to be an excellent platform for showcasing Kerala’s potential across key sectors, including logistics, food processing, medical devices, and technology. As Kerala continues to foster strong ties with international markets, it is on track to become a major player in the global economic landscape.

As the state gears up for the IKGS in February, all eyes will be on Kerala’s growing role as a dynamic economic hub, driven by innovation, industrial excellence, and strategic international partnerships.

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Key Foreign Investors in Indian Real Estate

Foreign investments were heavily dominated by three countries: Singapore, the United States, and Canada, collectively contributing over 25% of the total equity inflows. Among them, Singapore emerged as the largest contributor with a 36% share of the foreign equity investments in 2024. The US followed with a 29% share, while Canada accounted for 22%. Additionally, investments from the UAE saw a notable rise when compared to the previous year.

Despite the influx of foreign capital, domestic investments continued to be the leading driver of growth, making up 70% of the total equity investment in 2024.

Market Dynamics and Investment Trends

The Indian real estate market in 2024 was characterized by a renewed focus on capital deployment, especially in built-up assets and the acquisition of land and development sites. Developers were the dominant force in the capital inflows, attracting 44% of the total equity investments. Institutional players followed closely with a 36% share, while corporations, REITs (Real Estate Investment Trusts), and other categories contributed smaller shares of 11%, 4%, and 5%, respectively.

Looking ahead to 2025, CBRE forecasts that investment activity will maintain its upward trajectory. The market is expected to see increased investments in built-up office assets and a robust pipeline of residential development projects. Furthermore, the rapid growth of e-commerce and quick commerce is likely to drive significant investments into warehousing infrastructure.

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa at CBRE, commented, “We expect sustained momentum in investment activity, particularly in built-up office assets and residential development sites. The increasing focus on e-commerce and quick commerce is set to fuel strong growth in logistics and warehousing sectors, offering new opportunities for both developers and investors.”

Shifting Focus to Metros, Tier-I, and Tier-II Cities

India’s metros and tier-I cities will continue to dominate as the primary destinations for equity inflows. However, there is also a growing interest in tier-II cities, which are witnessing a surge in real estate development, driven by strong demand across multiple sectors. These include residential, mixed-use developments, industrial & logistics (I&L), retail, and hospitality.

Gaurav Kumar, Managing Director, Capital Markets and Land at CBRE India, stated, “We are poised to witness significant growth momentum in investment activity from both institutional investors and domestic developers. The surge in real estate development, combined with healthy demand for office, residential, mixed-use, and I&L spaces, is driving this trend. In addition, sectors such as retail and hospitality are expected to gain renewed attention as the market continues to evolve to meet changing consumer and business needs.”

In conclusion, the Indian real estate sector is poised for continued growth in 2025, driven by strong investment inflows, particularly in office, residential, and logistics spaces, as well as a growing interest in emerging locations. With a diversifying market landscape, developers and investors alike are finding new opportunities in this dynamic sector.

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The industrial and warehousing sector emerged as the dominant contributor to these investments, attracting a significant USD 2.5 billion. This represents a staggering 190% increase from the previous year and accounts for 39% of the total real estate investments. The office segment, which brought in USD 2.3 billion or 36% of total investments, closely followed the industrial sector in terms of inflows.

This surge in industrial and warehousing investments is primarily driven by robust manufacturing growth, improvements in logistics infrastructure, and India’s increasing position as a global manufacturing hub. Interestingly, more than 80% of these investments were sourced from foreign investors.

The residential real estate sector also performed well in 2024, with investments reaching USD 1.1 billion, marking a 46% increase compared to the previous year. This growth is attributed to strong domestic demand for housing.

Meanwhile, mixed-use properties saw a significant shift in investment patterns, with an impressive 822% rise in inflows, reflecting the evolving nature of investment trends in the Indian real estate market.

Domestic investors played a key role in driving the 2024 investment growth, contributing nearly one-third of the total inflows. These domestic investments increased by 27% YoY, with the fourth quarter of 2024 witnessing an especially strong performance. In Q4, investments reached USD 1.9 billion, more than double the amount seen in the same period of 2023. During this quarter, domestic investments accounted for 43% of the total, signaling increased confidence among Indian investors while international interest remained strong.

Foreign investments continued to dominate the Indian real estate market, contributing 66% of the total inflows. Of these foreign investments, investors from the Asia-Pacific (APAC) region made up nearly one-third, underscoring India’s growing appeal to global investors.

Mumbai captured the largest share of real estate investments in 2024, totaling USD 1.6 billion or 24% of the overall investments. The office sector led Mumbai’s real estate investments, making up 58% of the total, followed by industrial and warehousing investments at 20%.

Other major cities, including Bengaluru, Chennai, and Delhi NCR, attracted significant investment, each accounting for 8-9% of total inflows. Cities such as Hyderabad, Pune, and Kolkata also witnessed strong YoY growth in investments, particularly in the industrial and warehousing segments.

A notable trend in 2024 was the rise in multi-city deals, which accounted for 39% of the total real estate investments. This indicates a more balanced distribution of capital across India’s major real estate markets.

Badal Yagnik, CEO of Colliers India, commented, “APAC investors drove nearly one-third of the foreign inflows into the country’s real estate sector in 2024. Looking ahead, Tier-I cities will continue to attract the majority of capital, aided by government support for infrastructure development and the ‘Make in India’ initiative. While global investor confidence is expected to remain high, 2025 is likely to see increased capital deployment from domestic players across office, residential, and industrial segments.”

Vimal Nadar, Senior Director and Head of Research at Colliers India, added, “With the scale-up of manufacturing and continued healthy consumption levels, both domestic and global investments are expected to flow into ready-to-use and developmental industrial assets in the future.”

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In the second quarter of FY25, India’s CAD narrowed slightly to 1.2% of GDP from 1.3% in the same quarter of the previous year. The widening of the CAD is primarily attributed to a higher trade deficit, with India’s merchandise trade deficit rising to USD 75.3 billion in Q2 FY25, compared to USD 64.5 billion in Q2 FY24. This increase was driven mainly by higher non-oil imports, including a USD 5 billion year-on-year rise in gold imports.

On a positive note, India’s services sector emerged as a strong performer, with net services balance increasing to USD 44.5 billion in Q2 FY25, up from USD 39.9 billion in the same period last year. Exports from the software and business services sectors were particularly robust, while private remittances saw growth, reaching USD 29.3 billion. These factors have been instrumental in helping to contain the CAD.

In terms of capital flows, India recorded a surplus of USD 11.9 billion in the capital account in Q2 FY25, compared to USD 10.3 billion in Q2 FY24. A sharp surge in Foreign Portfolio Investment (FPI) inflows, which jumped to USD 19.9 billion from USD 4.9 billion in the previous year, played a key role in bolstering this surplus. Other contributors included non-resident Indian (NRI) deposits and External Commercial Borrowings (ECBs), which helped offset increased Foreign Direct Investment (FDI) outflows.

The balance of payments (BoP) saw a significant surplus of USD 18.6 billion in Q2 FY25, up from USD 2.5 billion in Q2 FY24, driven by strong capital inflows.

Despite concerns over sluggish FPI inflows in recent months and the pressure of a stronger US dollar on the Indian rupee, the report suggests that the rupee will likely trade within the range of 84-85.5/USD in the near term.

The surge in the trade deficit, particularly in November 2024, driven by gold imports, is expected to be a temporary phenomenon. However, the Bank of Baroda has raised concerns about potential risks, such as the possibility of protectionist trade policies under the incoming US administration.

Overall, while the CAD may experience temporary pressure due to higher imports, particularly of gold, resilient services exports and strong remittance inflows are expected to keep India’s CAD at manageable levels for FY25.

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