Indian Real Estate Industry Analysis

Real estate sector in India is expected to reach US$ 1 trillion by 2030. By 2025, it will contribute 13 per cent of the country’s GDP. Real Estate stock in India is expected to reach 3.7 million square feet in 2019, with addition of 200 million square feet during the year. Emergence of nuclear families, rapid urbanisation and rising household income are likely to remain the key drivers for growth in all spheres of real estate, including residential, commercial and retail. Rapid urbanisation in the country is pushing the growth of real estate. More than 70 per cent of India’s GDP will be contributed by the urban areas by 2020. Indian real estate increased by 19.5 per cent CAGR from 2017 to 2028.

Private Equity and Venture Capital investments in the sector reached US$ 4.47 billion in 2018 and reached US$ 3.9 billion, as of June 2019. Institutional investors pumped in Rs 24,220 crore (US$ 3.5 billion) in India’s real estate sector so far in 2019. During the first six months of 2019, the real estate sector witnessed private-equity (PE) inflows of Rs 27,767 crore (US$ 3.9 billion). Between 2009-18 (up to October 2018), Indian real estate sector attracted institutional investments worth US$ 30 billion.

Office space has been driven mostly by growth in ITeS/IT, BFSI, consulting and manufacturing. Gross office absorption in top Indian cities has increased 26 per cent year-on-year to 36.4 million square feet between Jan-Sep 2018. Warehousing space is expected to reach 247 million square feet in 2020 and see investments of Rs 50,000 crore (US$ 7.76 billion) during 2018-20. Grade-A office space absorption is expected to cross 700 million square feet by 2022, with Delhi-NCR contributing the most to this demand.

The Government of India has been supportive to the real estate sector. In August 2015, the Union Cabinet approved 100 Smart City Projects in India. The Government has also raised FDI limits for townships and settlements development projects to 100 per cent. Real estate projects within the Special Economic Zone (SEZ) are also permitted 100 per cent FDI. Exports from SEZs reached Rs 7.01 lakh crore (US$ 100.30 billion) in FY19.The total number of houses built under the Pradhan Mantri Awas Yojana (PMAY) reached 69 million up to May 27,2019. Government of India’s Housing for All initiative is expected to bring US$ 1.3 trillion investments in the housing sector by 2025. Under the Pradhan Mantri Awas Yojana (PMAY) Urban, 8.09 million houses have been sanctioned up to May27, 2019. The scheme is expected to push affordable housing and construction in the country and give a boost to the real estate sector. The government has also released draft guidelines for investments by Real Estate Investment Trusts (REITs) in non-residential segment.