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. Private equity and debt investments in Indian real estate increased to US$ 4.18 billion in 2017, compared to US$ 3.73 billion 2016. During January-March 2018, private equity investments in Indian real estate increased 15 per cent year-on-year to Rs 16,530 crore (US$ 2.6 billion). Investments in retail projects in tier 1 and tier 2 cities reached US$ 6.19 billion from 2006-17. Private equity investments in Indian retail assets increased 15 per cent in CY 2017 to reach US$ 800 million. During January-March, 2018 office space absorption increased 25 per cent year-on-year to around 11 million square feet. India jumped 13 spots in Knight Frank’s Global House Price Index to reach 9th position in Q2 2017.

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). 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.