Property prices in India are expected to increase 7.5% on a pan-India basis this year, the fastest growth in five years, according to property analysts. Sharing similar opinion, a recent report by RBSA Advisors stated that real estate investment is facing an upward trend and will reach $1000 bn by 2030, with a total contribution of 13% of India’s GDP by 2025. This will be an outstanding leap of 15% CAGR from $60 bn in 2010. The projections are that India will deliver 82 mn square feet by 2023 instead of the actual delivery of 40 million square feet in 2021.
BUOYANT REAL ESTATE
The reasons for such upbeat sentiments are not hard to find. The housing sales have not only recovered but have touched a new high during this year’s festive season. Big corporate are re-aligning their office portfolios and acquiring new office real estate for future growth. The smart city projects, infrastructure development plans and national logistics policy are all gearing up the tier 2 and 3 cities towards fast track real estate growth as well as encouraging alternate real estate classes such as warehousing, industrial and data parks and SEZs across the country. Large retailers are expanding and looking for new spaces in metros and smaller cities adopting the phygital business. model. Furthermore, a slew of measures introduced by the state governments, including monetary and fiscal stimulus are adding to supply and demand growth for real estate in the country.
Despite the rise in home loan interest rates and prices, the buyer’s enthusiasm hasn’t been dented. The rise in luxury apartments, plots, villas, and separate floors is a testimony to the thriving real estate market across cities. In addition, demand for mixed use commercial development has witnessed significant growth and commercial and retail property prices are rising favorably.
THE GROWTH INDICATORS
The top seven cities witnessed new launches of 60,307 apartments in Q1 2022, an increase of 36% q-o-q and 78% y-o-y. This marks the highest quarterly launches recorded since Q1 2014. Quarterly launches in Q1 2022 were also higher q-o-q across all the major cities, except Delhi NCR and Kolkata, as per JLL.
During Jan-September 2022, industrial & warehousing demand witnessed a 9% rise on a YoY basis with a total gross absorption of 17.5 mn sq across the top 5 cities in India. Improved retail market sentiment amidst festive season and higher online spending continue to support warehousing growth.
Knight Frank India in its latest report ‘cited that the total mall stock across the top eight cities of India is estimated at 92.9 million square feet (mn sq ft) of gross leasable area (GLA) as of H1 2022 with 271 operational malls in these cities. An incremental supply of 15.5 mn sq ft was added in the 30 months, despite the disruption of the pandemic during 2020 – 21. In December 2019, 77.4 mn sq ft of gross leasable area was recorded across 255 malls in these cities.
As per the latest CBRE research report, tier-II cities are poised to be the new growth vectors in India in the coming years - driven by their widening economic base and access to a skilled talent pool that are attracting occupiers to consider expanding in tier-II cities. Occupiers are further encouraged by the quality infrastructure as well as affordable land cost and operations in these locations. While some are leasing space to set up their operations, others also opt for the flexible space route.
The FICCI - Vestian report finds institutional investment in the country's real estate at around USD 27.8 billion from 2018 to September 2022 (YTD), with foreign funds funneling substantial investment into the sector. It states that several US-based and Singaporean PE firms have been remarkably active, accounting for most of the PE investment during 2018-YTD 2022.
WITH INDIA PROJECTED TO RETAIN ITS TAG OF THE FASTEST GROWING MAJOR GLOBAL ECONOMY, POSITIVE MOMENTUMS ARE EXPECTED TO CONTINUE PREVAILING IN INDIAN REAL ESTATE IN FY 23.