Indian Real Estate Industry Analysis

India's real estate market is expected to reach US$ 180 billion by 2020 from US$ 126 billion in 2015. 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. Housing sector is expected to contribute around 11 per cent to India’s GDP by 2020.

Cross-border capital inflows to India’s real estate sector have increased 600 per cent between 2012-17 to reach US$ 2.6 billion. In 2017, India ranked 19th out of 73 countries in attracting cross-border capital to its property market. Private equity investments in the sector increased 74.1 per cent year-on-year in the H1 2018 to reach US$ 2.24 billion. Between 2015 and March 2018, the retail segment in Indian realty attracted private equity investments of around Rs 5,500 crore (US$ $853.4 million) up to March 2018.

Office space has been driven mostly by growth in ITeS/IT,BFSI, consulting and manufacturing. Office space leasing increased by over 10 per cent to cross 20 million square feet in the first half of 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) between 2018-20.

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. Government of India’s Housing for All initiative is expected to bring US$ 1.3 trillion investments in the housing sector by 2025. Under Union Budget 2018-19, Pradhan Mantri Awas Yojana (PMAY) (Gramin) was allocated Rs 33,000 crore (US$ 5.10 billion) while the urban programme of the scheme was allocated Rs 31,500 crore (US$ 4.87 billion). In May 2018, construction of additional 150,000 affordable houses was sanctioned. 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.