The rapid surge in India’s middle-class demographic is a primary driver behind the notable transformations taking place within the Indian real estate sector. Development professionals, investors, and potential homeowners are keenly observing this disruptive transition, which is marked by a considerable uptick in both population figures and economic prosperity. Factors such as urbanization, increased income levels, and enhanced access to education serve as catalysts for this remarkable expansion.
Within this dynamic context, India’s residential real estate market emerges as a key barometer for shifting regulations, economic vitality, and evolving societal aspirations, bringing forth fresh opportunities and trends. The market value of India’s residential real estate reached an astonishing Rs.3.47 lakh crores in FY23, reflecting a robust annual growth of 48%. Furthermore, sales figures have also shown significant progress, with a 36% increase leading to 379,095 units sold.
As the country undergoes rapid transformation, every sector of the industry resonates in harmony with these changes. Here are the pivotal developments shaping India’s residential real estate landscape:
- Emerging Preference for Low-Density Housing: Popular choices today include plotted developments, townhouses, and villas, with low-density housing experiencing a remarkable demand surge. These types of housing consume fewer resources, such as electricity, air, and water, resembling small neighborhoods or single-family homes. Long-term residents of such housing types are encouraged to adopt sustainable lifestyles. By constructing neighborhoods with fewer homes, land preservation can occur, minimizing the necessity for additional infrastructure, thereby conserving resources. Buyers are increasingly recognizing the advantages associated with low-density living, seeking refuge from overcrowded urban environments while prioritizing privacy, space, and a connection with nature. Developers are responding to this demand with meticulously designed low-density projects, highlighting the significance of open spaces, greenery, and a sense of exclusivity. Notably, the annual Luxury Outlook Survey 2023 by India Sotheby’s International Realty indicates that nearly one-third of high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs) are prepared to spend over Rs 10 crores on real estate. For instance, Landmark Group achieved record sales at its Landmark Avana low-density project in Gurugram, particularly among a younger demographic eager for more space and a higher quality of life.
- Integration of Technology: Technological advancements are fundamentally altering the residential domain by enhancing comfort, security, and convenience. The inclusion of Internet of Things (IoT) devices, home automation frameworks, and AI-driven assistants has made these features standard in smart homes, establishing new benchmarks for futuristic living while delivering an integrated lifestyle experience. It is projected that India’s smart home sector will generate revenues of US$6.5 billion by 2024. Data from research institutes shows that India ranked third globally in 2020 concerning smart home adoption. Moreover, by 2025, the number of smart homes in India is expected to reach 442 million, indicating substantial growth from the current levels according to Statista’s Digital Market Outlook for 2021.
- Increased Desire for Home Ownership: The onset of the COVID-19 pandemic has led to a notable shift in societal attitudes towards homeownership. The emphasis on owning a home has become more pronounced than ever, with individuals appreciating the value of having personal space that accommodates work, study, and relaxation. Consequently, people are increasingly aware of the intrinsic value of homeownership, offering a greater sense of stability and security amid uncertainties. Housing loan disbursements from Indian banks reached around Rs 2 trillion in FY22, mirroring the pre-COVID levels and showcasing a resurgence in homebuyer confidence as more Indians turn to residential real estate.
- Luxury Living Trends: The focus of the market is skewed towards opulent and extravagant real estate, attracting discerning buyers in search of an unparalleled quality of life with top-notch amenities. A growing cohort of high-net-worth individuals has been expressed to be interested in acquiring luxury properties in the imminent years, according to recent surveys from India Sotheby’s International Realty. Factors such as rising income levels, deeper technological integration, and shifting consumer preferences fueled by demographic transitions have significantly disrupted the luxury real estate sector. Millennials, in particular, are showing a burgeoning interest in luxury real estate as their earnings rise and urban lifestyles evolve. The demand for premium properties is surging, driven by the prospect of substantial rental income and impressive returns on investment. The luxury home sales in India witnessed a staggering increase of 130% in the first half of 2023 compared to the previous year. A new residential project by Landmark Group positioned to debut on Dwarka Expressway aims to deliver a residential experience that epitomizes luxurious living, complete with state-of-the-art amenities tailored to the shifting lifestyle.
- Emergence of Tier 2 Cities: In the wake of the pandemic, many individuals reevaluated their living conditions and began searching for available houses in their hometowns, prompting a heightened focus on Tier 2 cities as burgeoning real estate hubs. This trend is leading to a notable increase in investment activities, significantly transforming the real estate markets in these cities. With a flourishing housing market in place, Tier 2 cities are rapidly developing their infrastructure, offering myriad opportunities for both residential and commercial purposes. Government initiatives supporting these cities are contributing to the growth of the real estate sector. The potential for township and settlement development projects can attract up to 100% Foreign Direct Investment (FDI) approval, boosting the visibility of Tier 2 city real estate growth surpassing that of Tier 1 cities. Notably, as of the end of FY 2021-22, the residential real estate market in Ahmedabad, valued at INR 83,390 crores, surpassed that of several Tier 1 cities including Chennai and Kolkata, which stood at INR 52,554 crore and INR 38,440 crore, respectively. Growth trends were also apparent in Tier 2 cities such as Nashik, Jaipur, Vadodara, and Gandhinagar.
Given the recent rise in housing demand, the government has intensified efforts to facilitate affordable housing construction, prompting developers to rethink their operational strategies. Affordable housing is defined as housing that is financially accessible to low- and middle-income families. The Landmark the Homes project in Sector 81 is expected to be completed by December 2024, according to the Landmark Group. Additionally, prospective homeowners can explore government-led initiatives aimed specifically for low-income groups or seek financing options provided by private lenders and non-banking financial companies (NBFCs). The Union Budget 2023-24 has outlined a commitment of Rs 79,000 crores (US$9.64 billion) toward the PM Awas Yojana, representing a striking 66% increase from last year.
Government efforts such as the Rajiv Awas Yojana and Pradhan Mantri Awas Yojana are driving developers to undertake projects aimed at offering affordable housing solutions, promoting inclusivity and accessibility within the real estate arena. The necessity of addressing the demand for 40 million urban housing units is pressing, given that our population is expanding at an annual rate of approximately 2.1%, and a significant segment of our populace possesses limited purchasing power.
India’s burgeoning urban population is fueling the demand for homes, dramatically altering the nation’s skylines and shaping its urban landscapes.