India's real estate sector: booming opportunities, robust demand, and policy support fueling growth

Advantages of the Indian Real Estate Market

Robust Demand:

•  According to Savills India, the demand for data centers in the real estate sector is expected to increase by 15-18 million sq. ft. by 2025.

•  Increased urbanization and rising household income have led to a surge in demand for residential properties, making India one of the top 10 price appreciating housing markets globally.

•  The organized retail real estate stock is projected to grow by 28% to 82 million sq. ft. by 2023.

Attractive Opportunities:

•  Indian firms are expected to raise more than Rs. 3.5 trillion (US$ 48 billion) through infrastructure and real estate investment trusts in 2022, compared to the US$ 29 billion raised so far.

•  Private market investor Blackstone, which has already invested significantly in the Indian real estate sector (worth Rs. 3.8 lakh crore or US$ 50 billion), plans to invest an additional Rs. 1.7 lakh crore (US$ 22 billion) by 2030.

Policy Support:

•  Increasing transparency and returns have led to a surge in private investment in the real estate sector.

• The government allows up to 100% foreign direct investment (FDI) for townships and settlements development projects.

• The Union Budget 2023-24 has allocated Rs. 79,000 crore (US$ 9.64 billion) for the PM Awas Yojana, representing a 66% increase compared to the previous year.

Increasing Investments:

• Private equity investments in India's real estate sector reached US$ 3.4 billion in 2022.

• FDI in the sector, including construction development and activities, reached US$ 55.5 billion from April 2000 to December 2022.

Snapshot of the Market:

• The real estate market in India is expected to grow to Rs. 65,000 crore (US$ 9.30 billion) by 2040, contributing 13% to the country's GDP by 2025.

• The retail, hospitality, and commercial real estate sectors are also experiencing significant growth.

• The country's flexible space stock is projected to expand by 10-15% annually, reaching 36 million sq. ft. in the next three years.

• The housing sector faces a shortage of approximately 10 million units in urban areas, with an additional 25 million affordable housing units needed by 2030.

Government Initiatives:

• The government has allocated Rs. 79,000 crore (US$ 9.64 billion) for the PM Awas Yojana in the Union Budget 2023-24.

• The RBI's decision to keep benchmark interest rates unchanged at 4% provides a boost to the real estate sector.

• The Atmanirbhar Bharat 3.0 package includes income tax relief measures for real estate developers and homebuyers.

• The government has approved the setting up of a Rs. 25,000 crore (US$ 3.58 billion) alternative investment fund to revive stalled housing projects.

Road Ahead:

• The introduction of Real Estate Investment Trusts (REITs) allows all types of investors to participate in the Indian real estate market, creating a potential opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in the coming years.

• The residential sector is expected to grow significantly, with the government aiming to build 20 million affordable houses by 2022 under the PMAY scheme.

• The increasing demand for housing units in urban areas will also drive the demand for commercial and retail office space.

Disclaimer: The information provided in this insight report on India's real estate sector is for general informational purposes only. While we strive to ensure the accuracy and reliability of the content, it should not be considered as financial advice or a substitute for professional consultation. The report does not create an client relationship, and any reliance on the information provided is at the reader's own risk. We recommend consulting with a qualified professional or expert for specific advice related to real estate transactions or financial matters.