Indian Real Estate Market: An Overview
The real estate industry stands as one of the most prominent sectors worldwide, encompassing four distinct sub-sectors: housing, retail, hospitality, and commercial. Its’ growth is intricately linked to the expansion of corporate activities and the rising demand for office spaces, urban residences, and semi-urban accommodations. Within the 14 major sectors of the economy, the construction industry holds a significant position, ranking third in terms of its direct, indirect, and induced effects.
In India, the real estate sector plays a pivotal role as the second-largest generator of employment, following the agriculture sector. Forecasts suggest a promising future for this industry, with expectations of increased investment from non-resident Indians (NRIs) both in the short and long term. Among the favored destinations for NRI property investment, Bengaluru takes the lead, followed closely by Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun.
The Indian real estate sector’s growth potential, coupled with its impact on employment and investment, underscores its critical position in the country’s economic landscape. As opportunities and challenges continue to emerge, the industry remains poised for further development and expansion.
Market Size:
The real estate market in India has been witnessing significant growth, and it is projected to continue expanding in the coming years. By 2040, the market size is estimated to reach Rs. 65,000 crore (US$ 9.30 billion), a substantial increase from Rs. 12,000 crore (US$ 1.72 billion) recorded in 2019. The sector’s growth trajectory is promising, with expectations of reaching a market size of US$ 1 trillion by 2030, compared to US$ 200 billion in 2021. This growth is anticipated to contribute 13% to the country’s GDP by 2025.
Developers are optimistic about the demand for office spaces in Special Economic Zones (SEZs) following the replacement of the existing SEZs act, which is expected to drive further growth in the commercial real estate segment.
Government-driven actions
The Government of India, in collaboration with the State governments, has implemented various measures to promote growth in the real estate sector. One notable initiative is the Smart City Project, aiming to construct 100 smart cities, providing a significant opportunity for real estate companies. Additionally, the Union Budget 2023-24 unveiled a substantial commitment of Rs. 79,000 crore (US$ 9.64 billion) for the PM Awas Yojana, marking a remarkable 66% increase compared to the previous year’s allocation. To address the revival of approximately 1,600 stalled housing projects in major cities across the country, the Union Cabinet has given its approval for the establishment of a Rs. 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF).
Furthermore, the government has established an Affordable Housing Fund (AHF) within the National Housing Bank (NHB) with an initial corpus of Rs. 10,000 crore (US$ 1.43 billion). This fund is sourced from the priority sector lending shortfall of banks/financial institutions and is intended to facilitate micro-financing of the Housing Finance Companies (HFCs).
Summary:
The approval granted by the Securities and Exchange Board of India (SEBI) for the Real Estate Investment Trust (REIT) platform has opened the Indian real estate market to investors of all types. This move is expected to create a substantial opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in the Indian market in the forthcoming years.
In response to a more informed consumer base and in consideration of globalization, Indian real estate developers have adapted to new challenges by transitioning from family-owned businesses to professionally managed entities. Notably, they are focusing on efficiently managing multiple projects across different cities, implementing centralized processes for sourcing materials and organizing manpower, and hiring qualified professionals in fields such as project management, architecture, and engineering. These strategic shifts reflect the industry’s commitment to meeting the evolving demands and capitalizing on the growth prospects.
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