Increase in economic activity followed by healthy macroeconomic trends will help the real estate sector to grow. Government reforms are accelerating commercial real estate activity. Recent trends show healthy manufacturing PMI values, indicating an expansion in manufacturing activity. The rapid growth in the number of middle-income households indicates that affordability is increasing.
KEY TRENDS IN INDIAN REAL ESTATE
- The residential sales momentum is likely to sustain; consumers prefer bigger homes and better amenities. • Retirement housing is seen as a lucrative segment amidst faster growth in elder population.
- Consumers prefer sustainable homes, fuelling demand for such projects.
- The upsurge in IT hiring and R&D activity has fuelled demand for office space. Flexible office space model, wherein the central unit and a large network of small offices spread throughout the city is perfectly aligned with the hybrid model that big corporates have been implementing’
- Increased e-commerce adoption in tier II and III cities has created demand for the warehousing space nearer to these locations. The need for faster delivery fuels strong demand for in-city warehouses.
- Strong growth in data consumption and the need to store data closer to users require India’s data centre capability to be strengthened. The data centre market investment is expected to reach USD4.6 billion per annum by 2025.
- Both leisure and business travels are returning to pre-COVID levels, pushing the hospitality sector to the expansion mode. Favourable demand prospects attract institutional investors.
CHALLENGES FACED BY INDIAN REAL ESTATE
- Construction costs have seen a 28% jump since the pre-pandemic levels. Cost of key construction materials up by 32% in three years.
- Base interest rates hiked multiple times since last May. Repo rate increased from 4% to 6.5%.
- Use of traditional methods in construction projects hamper industries overall growth.
- Affordable land remains one of the key concerns of the real estate sector.
India is emerging as a major global powerhouse, due to mega trends such as global offshoring, digitisation and energy transition.