Understanding the Indian Real Estate Landscape
The term "Real" comes from the Latin word rex, signifying "royal", highlighting a time when sovereignty over land was held by kings within their realms. Today, the real estate sector stands as a universal staple in economies worldwide. When viewed from a commercial perspective, it involves the intricate dance of developing, purchasing, and selling properties. Notably, among the fourteen principal sectors of the economy, construction occupies a pivotal third rank. Forecasts suggest that by the year 2040, the Indian real estate market could expand impressively from Rs. 12,000 crores (around US$ 1.72 billion) in 2019 to a substantial Rs. 65,000 crores (approximately US$ 9.30 billion).
Following the agriculture sector, real estate serves as the second-largest provider of employment in India. It is also poised to attract both short and long-term investments from non-resident Indians (NRIs). Currently, Bengaluru leads the pack as a preferred property investment hub for NRIs, with notable mentions for Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun, as noted by PropertyWala.com.
Projected Market Values for Indian Real Estate by 2040
The Indian real estate industry is expected to attain a market size of US$ 1 trillion by 2030, a leap from US$ 200 billion recorded in 2021. Furthermore, it is anticipated to account for around 13% of the nation’s Gross Domestic Product (GDP) by 2025. The need for enhanced infrastructure continues to foster growth across various sectors, including retail, hospitality, and commercial real estate. In a noteworthy achievement, more than 1,700 acres of land transactions occurred within India’s top seven cities over the past year. Foreign investments in the commercial real estate sector amounted to US$ 10.3 billion between 2017 and 2021.
As per insights from the Investment Information and Credit Rating Agency of India Limited (ICRA), Indian enterprises are projected to generate more than Rs. 3.5 trillion (equivalent to US$ 48 billion) through infrastructure and real estate investment trusts by 2022. Moreover, the Savills India report anticipates a burgeoning demand for data centers, expecting an increase of 15-18 million square feet (MSF) by 2025, a substantial rise from the 40 MSF delivered in 2021. India aims to capture a remarkable 40% market share in the data center sector within the next two to three years while eyeing a delivery target of 46 MSF in 2022.
Final Thoughts:
A staggering total of 55,907 new housing units were sold across eight micro markets between July and September 2021, reflecting a robust year-over-year growth of 59%. In comparison, the new housing supply during this quarter was approximately 65,211 units, signifying a 228% year-over-year increase compared to ~19,865 units launched in the same period of 2020. The commercial real estate market has also been witnessing an uptick in investments for the fiscal year 2021-22, especially in prominent areas like Gurugram.
Insights from the Economic Times Housing Finance Summit Report:
Current trends indicate that around three homes are constructed per 1,000 people each year, considerably lagging behind the optimal rate of five per 1,000. Urban areas face a significant housing deficit, estimated at approximately 10 million units, underscoring the urgent need for 25 million housing units by 2030 to accommodate the rising urban population.