The 2024 marked a watershed year in India's real estate sector, with a surge in land acquisitions. Developers across the country embarked on an ambitious expansion drive, securing a vast 2,335 acres of land through 134 distinct transactions in key 23 cities. These strategic land acquisitions, valued at a staggering Rs 39,742 crore, laid the foundation for the potential development of 194 million sq. ft of real estate.
While Tier I cities maintained their dominance, accounting for 72 per cent of the land purchases, the year witnessed a significant shift towards smaller urban centres. Tier II and III cities claimed a substantial 28 per cent share of the acquisitions, translating to 662 acres of land. This trend signals a growing recognition of the untapped potential in these emerging markets. Notably, cities like Nagpur, Varanasi, Indore, Vrindavan, and Ludhiana emerged as unexpected hotspots in this land acquisition spree. Their prominence in the year's transactions underscores a broader trend of geographical diversification in real estate development, moving beyond the traditional metropolitan strongholds.
This strategic pivot towards a more balanced urban development model reflects changing market dynamics and hints at a future where growth is more evenly distributed across India's urban landscape.
The analytics indicate that the transacted per acre land cost increased continuously in the last three years from ~ Rs 11 crore in 2022 to Rs 17 crore in 2024. Post-COVID-19, 2024 stands out as the best-performing year for real estate across office and residential asset classes, reflected by the strong demand and supply performance indicators. As the real estate sector's upward growth trajectory continues, developers are investing steadily in building their land bank across the country for their future development pipeline.
The Mumbai Metropolitan Region (MMR) emerged as the frontrunner in land acquisition 2024, with developers securing approximately 407 acres through 19 separate deals, accounting for 17 per cent of the year's total land transactions. This represents a 41 per cent increase from the previous year's 288.9 acres. Notable transactions included deals of 50 acres or more in micro-markets such as Khalapur, Palghar, and Khapoli. While MMR led in land area acquisition, the National Capital Region (NCR) surpassed other cities in the number of deals closed, with 36 land transactions throughout the year. Within NCR, Gurugram saw the highest activity with 21 deals, followed by Noida with 14 and Ghaziabad with one.
This extensive land acquisition is projected to necessitate a substantial capital investment of Rs 62,328 crore for development based on the current construction cost. The top 7 cities emerged as the focal point of this real estate potential and are expected to attract the lion's share of the projected capital requirements. They witnessed land acquisitions totalling 1,673 acres. This substantial urban land acquisition translates to 91 per cent of the projected total capital needed for development, underscoring the concentrated focus on major metropolitan areas in the country's real estate landscape.
The growth in land acquisitions in tier II and III cities, while significant, translated to a more tempered financial outcome due to lower construction costs and distinct different real estate formats. These emerging urban centres account for just 9 per cent of the estimated capital required for development, highlighting the significant differences between major metropolitan areas and smaller cities.
While MMR led in land acquisition for 2024, Delhi-NCR and Bengaluru have emerged as the primary hubs for development. These two cities together represent over 64 per cent of the projected capital requirements among the top eight urban centres. MMR's land acquisitions, despite being substantial, were predominantly in peripheral areas (84 per cent of total acquisitions). These outlying locations had lower construction costs and less development potential than more central areas, which explains the disparity between land acquisition and capital needs.
India's real estate sector has evolved into a dynamic financial ecosystem. Traditional banking institutions and non-banking financial companies now share the stage with private equity firms and venture capitalists, creating a robust and versatile financing landscape. Diversifying capital sources has empowered borrowers with enhanced flexibility and expanded opportunities, allowing them to tailor their funding strategies to specific project needs and market conditions.
The real estate landscape in India is poised for a strategic evolution, with developers adopting a multi-tiered approach to land acquisition. While the top 7 cities are expected to remain the primary focus for land banking, there's a growing recognition of the potential in Tier II and Tier III markets. This dual strategy aims to create a balanced and opportunistic development pipeline across various urban centres. In the top 7 cities, developers will likely continue their aggressive land acquisition, capitalising on established markets and high demand. Simultaneously, they maintain a steady presence in Tier II and III cities, acknowledging these areas as future growth hotspots.
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