Table Of Contents
- The Size of the Market
- Investments and Developments in the Real Estate Sector
- Government Initiative towards Real Estate Sector
- Role of SEBI in the Growth of the Real Estate Sector
- Future of the Real Estate Market in India
Among the most well-known industries in the world is the real estate industry. The four subsectors of this industry are housing, retail, hospitality, and business. With the rise of the corporate environment, the demand for office space and urban and semi-urban accommodation has increased, assisting the growth of this business. Among the 14 major industries, the construction industry ranks third, covering direct, indirect, and induced sectors of the economy.
The real estate sector creates the second most number of jobs in India, after agriculture. This industry is also likely to attract more excellent non-resident Indian (NRI) investments in the short and long term. The most valued property investment destination for NRIs is Bengaluru, Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun.
The Size of the Market
- From Rs. 12,000 crores in 2019, the real estate industry would rise to Rs. 65,000 crores by 2040. India’s real estate market is forecasted to grow to US$ 1 trillion by 2030, up from US$ 200 billion in 2021, and contribute 13% of the country’s GDP by 2025.
- Retail, hotel, and commercial real estate are seeing considerable growth, supplying India with much-needed infrastructure.
- According to ICRA, Indian companies are likely to raise more than Rs. 3.5 trillion through infrastructure and real estate investment trusts in 2022, compared to US$ 29 billion raised so far.
- As per the Economic Times Housing Finance Summit, roughly three homes are created per 1,000 people every year, compared to the required five dwellings per 1,000 occupants.
- Cities are expected to have a housing shortage of more than 10 million units. To handle the country’s urban population expansion, an additional 25 million affordable housing units will be required by 2030.
Investments and Developments in the Real Estate Sector
With the increased demand for commercial and residential spaces, the Indian real estate market has rapidly expanded in recent years. According to a recent study by Colliers India, private equity investments in Indian real estate totalled US$ 2.9 billion in the first half of 2021, up more than twofold from the same period in 2020.
The following are some of the worth mentioning investments and developments in the Sector-
- Between January and September 2021, private equity investment into India’s real estate business totalled US$ 3.3 billion.
- In the third quarter of 2021, home sales volume in India’s seven biggest cities expanded by 113 per cent year on year to 62,800 units, up from 29,520 units the previous year, indicating a healthy recovery after the stringent lockdown and curfew pressed in the second quarter because of the spread of COVID-19 across the country.
- In the third quarter of 2021, institutional real estate investment in India increased by 7% year on year. In the initial nine months of 2021, investment totalled US$ 2,977 million, up from US$ 1,534 million in the same period the preceding year.
- Ascendas India paid Rs. 353 crores for Aurum Ventures’ 16-story commercial skyscraper in Navi Mumbai in November 2021, making it the highest sale of a standalone commercial tower by a significant institutional investor in recent years.
- In the third quarter of 2021, the central three cities—Mumbai (39 per cent), NCR-Delhi (19 per cent), and Bengaluru (19 per cent)—attracted 77 per cent of total investments.
- According to a CBRE analysis, India’s flexible space stock is expected to grow by 10-15% YoY in the next three years from 36 million sq. ft recently.
- GIC stated in June 2021 that it would purchase a minority share in Phoenix Mills’ portfolio (about US$ 733 million) to create an investment platform for Indian retail-led mixed-use projects.
Government Initiative towards Real Estate Sector
The Indian government, in partnership with the governments of several states, has made several efforts to foster the industry’s growth. The Smart City Project, which aspires to construct 100 smart cities, should be used by real estate companies. The following are some additional essential government initiatives:
- The RBI stated in October 2021 that the benchmark interest rate would remain at 4%, providing a significant boost to the country’s real estate sector. Low house loan interest rates are predicted to fuel housing demand and boost sales by 35-40% during the holiday season of 2021.
- The Indian government, in partnership with the governments of several states, has made several efforts to foster the industry’s growth. The Smart City Project, which aspires to construct 100 smart cities, should be used by real estate companies. The following are some additional essential government initiatives:
- The RBI announced in October 2021 that the benchmark interest rate would remain at 4%, giving the country’s real estate sector a considerable boost. Low mortgage interest rates are expected to stimulate home demand and sales by 35-40% over the 2021 Christmas season.
- With an initial capital of Rs 10,000 crore (US$ 1.43 billion), the government has created an Affordable Housing Fund (AHF) at the National Housing Bank (NHB) to leverage priority sector lending deficits of banks and financial institutions for HFC microfinance.
Role of SEBI in the Growth of the Real Estate Sector
The Real Estate Investment Trust (REIT) platform has been certified by the Securities and Exchange Board of India (SEBI), allowing investors to engage in the Indian real estate market.
- It will have a market potential of Rs. 1.25 trillion in India in the following years. Indian real estate developers have altered gears and embraced new difficulties due to an increasingly well-informed consumer base and the globalisation factor.
- The transition from family-owned to professionally managed firms has been the most noticeable change. Real estate developers are investing in centralised methods for sourcing materials, organising the workforce, and recruiting experienced specialists in project management, architecture, and engineering to address the increased need to manage various projects across cities.
Future of the Real Estate Market in India
The real estate market in India has seen significant private equity investment in the first half of FY23. Currently worth $200 billion, the sector is projected to reach $1 trillion and employ nearly 70 million people by 2030. The industry continues to grow and adapt to big tech, with steady post-pandemic demand and confidence in the commercial real estate sector, signaling an upsurge in economic activity, especially in sectors like residential, offices, warehousing, data centers, etc.