Japanese Property Giants Deepen Their Push into a Booming Indian Market
India's real estate market is experiencing a surge in foreign investment, with Japanese property giants increasingly making their presence felt. Drawn by the potential for long-term growth and attractive returns, these companies are deepening their involvement in various segments, solidifying India's position as a prime destination for global capital.
Several major Japanese firms are either investing or expanding their existing investments in the Indian real estate sector. These include Mitsui Fudosan, Mitsubishi Corporation, Sumitomo Corporation and Genkai Capital. These investors are attracted to India's strong economic fundamentals, rapidly growing urban population, and increasing demand for quality real estate across residential, commercial, and industrial segments.
Japanese investors typically offer long-term capital with investment horizons spanning 8-12 years and are known to have a considerable appetite for equity transactions across various real estate asset classes. They generally seek an Internal Rate of Return (IRR) of around 18% on their investments.
Several factors contribute to this growing interest. India's real estate market is projected to expand significantly, with some estimates forecasting a rise from $332.85 billion in 2025 to $985.80 billion by 2030. This represents a compound annual growth rate (CAGR) of 24.25%, highlighting the sector's increasing demand, investment potential, and evolving opportunities. The increasing urbanization, with approximately 600 million Indians expected to reside in cities by 2030, is a major driver, boosting the need for residential and commercial spaces.
The Comprehensive Economic Partnership Agreement (CEPA) between India and Japan has also fostered stronger bilateral ties, simplifying operations for Japanese investors in the Indian real estate market. The Indian government permits 100% Foreign Direct Investment (FDI) in the construction development sector through the automatic route, subject to certain conditions. This includes the development of townships, residential and commercial premises, roads and bridges, hotels, hospitals, educational institutions, recreational facilities, and city-level infrastructure.
Several notable investments exemplify this trend. Mitsui Fudosan, for instance, has partnered with RMZ Corp to develop a $1 billion commercial project in India. Mitsubishi Corporation has invested approximately ₹180 crore in a residential project by Shriram Properties in Chennai. Sumitomo Corporation acquired a three-acre land parcel in Mumbai's Bandra Kurla Complex for ₹2,238 crore.
While the primary focus of Japanese investment lies in industries and infrastructure, the real estate sector benefits indirectly through transit-oriented growth, industrial townships and the expansion of major cities. For example, the Mumbai-Ahmedabad bullet train project, a result of Indo-Japanese collaboration, is expected to stimulate residential and commercial demand in surrounding areas.
The increasing Japanese interest in Indian real estate aligns with a broader trend of rising foreign investment in the sector. In the first half of 2024, foreign institutional investors poured $3.5 billion into Indian real estate, making it the third most preferred global destination for land and development site investments.
Looking ahead, analysts are optimistic about the continued growth of the Indian real estate market, fueled by economic expansion, demographic shifts, and evolving consumer preferences. The rise of Real Estate Investment Trusts (REITs) is also expected to unlock further investment opportunities and attract a wider range of investors. While challenges remain, such as affordability for lower-income households and the need for regulatory compliance, the long-term outlook for Indian real estate remains bright, with Japanese property giants poised to play a significant role in its continued expansion.
