The real estate sector is one of the most globally recognised sectors, comprising four sub-sectors: housing, retail, hospitality, and commercial. The growth of this sector is well perfected by the growth in the corporate milieu, demanding office space, and urban and semi-urban accommodation. The Construction Industry ranks third among the 14 chief sectors in direct, indirect, and induced effects in all economic sectors.

In India, the second-highest employment generator is real estate, after the agricultural sector. Besides, this sector is expected to incur more Non-Resident Indian (NRI) investments in the short and long term. As per the report, Bengaluru would be the most chosen property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun.

Indian Real Estate Market Size

By 2040, the real estate market will boost to Rs 65,000 crore from Rs 12,000 crore in 2019. The real estate sector will likely reach $1 trillion in market size by 2030, a high from $200 billion in 2021, funding 13% of India’s GDP by 2025. India’s real estate sector witnessed 1,700 acres of land deals in the upper seven cities in a year. Foreign investments in this sector were at $10.3 billion from 2017-21. As per ICRA evaluations, Indian firms are expected to raise Rs 3.5 trillion-plus through Infrastructure and Real Estate Investment Trusts in 2022, linked with raised funds worth $29 billion. Approximately 40 million square feet were carried in India, and in 2022, it aims for 46% million square feet. In the next 2-3 years, the country will have a 40% market share.

The 3PL, e-commerce, and retail segments accounted for 34%, 26%, and 9% of office space rents, respectively. Out of the total PE investments in real estate (Q4 FY21), the office segment involved 71% share, retail 15%, and residential and warehousing with 7% each. The gross leasing volume of the top seven office markets was 11.55 million sq. ft. From July 2021-September 2021, a total of 55,907 fresh housing units were sold in the eight micro markets in India, leading to 59% YoY progress. For instance, Chintels Group declared to invest Rs 400 crore for building a new commercial project in Gurugram that covers a 9.28 lakh square feet area in October 2021.

The existing housing deficiency in urban areas is projected to be ~10 million. By 2030, a surplus of 25 million units of cheap housing is required to grow the country’s urban population.

Investments = Developments

According to Colliers India, institutional investments in the Indian real estate sector are predicted to increase by 4% to reach Rs. 36,500 crores in 2021. Private equity investments in Indian real estate reached $2.9 billion in the first half of 2021, which doubled from the first half of 2020. Exports from Specific Economic Zones (SEZs) reached Rs 7.96 lakh crore in FY20 and grew ~13.6% from Rs 7.1 lakh crore in FY19. In July 2021, SEBI dropped the minimum application value for Real Estate Investment Trusts from Rs 50,000 to Rs 10,000-15,000, making the market accessible to small retail investors. FDI in the construction, development, and activities sector was $54.17 billion from April 2000 to March 2022.

Major Investments And developments Made

From January to September 2021, private equity investment inflows into the real estate sector in India stood at US$ 3.3 billion. Despite the pandemic, the residential Real Estate market is booming. The need for real estate in India’s Tier 1 cities has risen with the COVID-19 pandemic, as the pandemic lockdowns have triggered a strong desire among people to own an abode. 

According to Knight Frank’s latest market evaluation, the quarterly sales in FY22 (January-March) surpassed 78,627 residential units despite the third wave. In India, Mumbai recorded the largest sales volume at 21,548 units in Q1 2022, while Delhi-NCR recorded the highest yearly growth in sales volume at 123%. Bangalore ranked third in residential sales volume and displayed a yearly growth of 34% in Q122, selling 13,663 new units. REA India-owned Digital Real Estate Company Housing.com tied up with online legal guide start-ups LegalKart, Lawrato, Vidhikarya, and Vakil in 2021 to offer legal advice and guidance to homebuyers. The top three cities like Mumbai (~39%), NCR-Delhi (~19%), and Bengaluru (~19%), engrossed ~77% of the overall investments recorded in the third quarter of 2021. 

In May 2021, Blackstone Real Estate acquired Embassy Industrial Parks for Rs 5,250 crore, expanding its presence in the country. According to Anarock, housing sales increased in seven cities by 29%. Private market investor Blackstone, which has significantly invested in the Indian real estate sector of Rs 3.8 lakh crore, seeks to invest an additional Rs 1.7 lakh crore by 2030.

In April 2021, HDFC Capital Advisors united with Cerberus Capital Management to create a platform emphasising high-yield prospects in the Indian residential real estate sector. The platform purchases inventory and provides funding for the construction of residential projects all across the country. In March 2021, Godrej Properties launched ten new real estate projects in Q4. In March 2021, Godrej Properties increased its equity stake in Godrej Realty from 51% to 100% by purchasing equity shares from HDFC. 

Government Initiatives In Real Estate Sector

India and other State governments have taken initiatives to boost development in this sector. The Smart City Project plans to build 100 smart cities and an opportunity for real estate companies. Let’s have a look at major Government initiatives.

• RBI announced to keep the interest rates unchanged at 4% to boost the real estate sector.
• The low home loan interest rates increase sales by 35-40% in the 2021 festive season.
• In the Union Budget of 2020-21, the tax was deducted up to Rs 1.5 lakh on housing loans.
• FM Nirmala Sitharaman’s announced project of Atmanirbhar Bharat 3.0 package relief income tax measures for real estate primary purchase or sale of residential units of Rs 2 crore.
• The Union Cabinet approves Rs 25000 crore for an alternative investment fund (AIF) to revive 1600 stalled housing projects in Tier 1 cities of the country.
• The GOI has designed an Affordable Housing Fund (AHF) in the National Housing Bank (NHB) worth Rs 10,000 for the microfinancing of the HFCs.
• India, in January 2021, approved 425 SEZs, out of which 265 were in operation. As observed, most SEZs are in the IT or BPM sector.
• The Indian government aims for housing for all by 2022, cites high housing demand, and intensifies its attention on the Pradhan Mantri Awas Yojana (PMAY) “Housing for All”, focusing on the rural area.
• The government also announced the Real Estate (Regulation and Development) Act, 2016, in Jammu Kashmir Union Territory in October 2020.

Progress Route For Real Estate Sector

The Securities and Exchange Board of India (SEBI) has announced its approval for the Real Estate Investment Trust (REIT) platform, allowing investors to invest in the Indian real estate market. This platform creates an opportunity worth Rs 1.25 trillion in the Indian market in the upcoming years. Retorting to a growing well-informed consumer base and reviving the Globalisation aspect, Indian real estate developers have accepted fresh challenges in their sector. Firstly, the marked change has shifted from family-owned businesses to professionally managed ones. Real estate developers discuss the growing need to manage multi projects across cities, invest in centralised routes to arrange manpower and hire well-qualified professionals for event management, architecture, and engineering.

The residential sector is growing significantly, with the Central Government targeting to construct 20 million affordable houses, especially in the country’s urban areas, by 2022, under the ambitious project Pradhan Mantri Awas Yojana (PMAY) scheme by the Union Ministry of Housing and Urban Affairs. The Anticipated growth in the number of housing units in urban areas would develop the demand for commercial and retail office space. As per data, the current housing shortage in urban areas is estimated to be approximately 10 million units. Additionally, 25 million affordable housing units are needed by 2030 for the country’s urban population growth.

The rising flow of FDI in Indian real estate is inspiring increased transparency. Thus, Developers, to appeal for funding, have refurbished their accounting and management systems to see due diligence standards. Indian real estate is projected to fascinate a substantial FDI amount in the next two years with an $8 billion capital infusion by FY22.

//////////////////////////////