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.

Real estate attracted around Rs 43,780 crore (US$ 6.26 billion) of investments in 2019. The retail segment in Indian realty attracted private equity investments of around US$ 1 billion in 2019. Real estate attracted around US$ 14 billion of foreign private equity (PE) between 2015 and Q3 2019. First REIT raised Rs 4,750 crore (US$ 679.64 million) and was launched earlier in 2019 by the global investment firm Blackstone and realty firm Embassy group.

Office space has been driven mostly by growth in ITeS/IT, BFSI, consulting and manufacturing. Gross office absorption in top Indian cities has increased 18.7 million square feet between April-June 2019. In first nine month of 2019, the office sector demand with commercial leasing activity reached 47 mn sq ft. 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. Housing sales are expected to increase by 4 per cent year-on-year by 2018 end to reach 2.58 lakh units across seven major cities.

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. As of December 2019, under Pradhan Mantri Awas Yojana (Urban) [PMAY (U)], 1.12 crore houses have been sanctioned in urban areas creating 1.20 crore jobs. 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.