Indian Real Estate Industry Analysis

Real estate sector in India is expected to reach US$ 650 billion and its share in India’s Gross Domestic Product (GDP) is projected increase to 17 per cent by 2040. 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.

Cross-border capital inflows to India’s real estate sector have increased 600 per cent during 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 and Venture Capital investments in the sector have reached US$ 4.47 billion in 2018. 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).

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. The total number of houses built under the Pradhan Mantri Awas Yojana (PMAY) reached 15.3 million between 2014-18. 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, 6,028,608 houses have been sanctioned up to September 2018. 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.