Insights into the Dynamics of India's Thriving Real Estate Market: 2024
India is one of the fastest growing economies of the world and is poised to continue on this path, aiming to become a high middle-income country by 2047, the centenary of Indian independence. In the fiscal year 2022-23, India’s real GDP grew by an estimated 6.9 percent. This growth was driven by strong domestic demand and significant government investment in infrastructure, which has greatly influenced real estate development.
Real estate has always been a crucial factor in Indian economy but its significance has increased even more in recent times. The rapid population growth and urbanization stands as a primary driver fueling the growth of the real estate market in the country. Additionally, government policies and initiatives, such as affordable housing schemes, support market expansion by meeting the housing needs of middle and lower-income groups.
As India's economy grows, urban incomes rise and people have more disposable incomes which means increasing purchasing power. This is resulting in increase in demand for real estate properties as more people can afford to buy it. Infrastructure improvements, like better connectivity, further boost the real estate market. The expansion of retail and e-commerce also increases the need for commercial spaces, warehouses, and logistics centers. But there is a positive twist on it. With more awareness, people are looking for sustainable and green buildings, which positively impacting the market.
Moreover, real estate investment trusts (REITs) offer new investment opportunities for both local and international investors, strengthening the market. The entry of international players and increased foreign direct investment (FDI) also contributing significantly to the sector's growth.
Let’s explore the insights from various reports and statistics to better understand the current situation and future trends in India’s real estate market for the rest of 2024!
Infrastructure Investments leading to the Real Estate Benefits:
The connection between infrastructure development and real estate benefits can be analyzed through several lenses: direct impact on property values, new developments, improved quality of life, and economic growth stimulation.
Direct Infrastructure investments:
Take a look at projects like the Delhi-Mumbai Industrial Corridor (DMIC) and the Mumbai Metro expansion. These have demonstrated a direct positive impact on adjacent property values, just as we've seen happen in other parts of the world. The Indian government's commitment for infrastructursal development is evident to this cause, allocating 3.3% of GDP to infrastructure in 2024, with a strong focus on transport and logistics.
Major plans of Indian Infrastructure:
Road Infrastructure
Road infrastructure development in India is advancing through the Bharatmala Pariyojana, with Phase I dedicated to the enhancement of 34,800 kilometers of National Highways. This initiative prioritizes corridor-centric development strategies and is projected to be completed by the fiscal year 2027-2028.
Air Connectivity
The Ministry of Civil Aviation's UDAN (Ude Desh Ka Aam Nagarik) scheme, initiated in 2016, endeavors to bolster air connectivity to regional airports situated in smaller towns across India. In its initial five-year span, UDAN facilitated the transportation of over one crore passengers (10 million), inaugurating 425 new routes and 58 airports. Moreover, the government has delineated plans for the revitalization of 50 additional airports, heliports, water aerodromes, and advanced landing grounds.
Railways
India's railway sector is engaged in ambitious endeavors, including the Mumbai-Ahmedabad Speed Rail Corridor and the construction of the world's highest pier bridge, along with the Chenab bridge in Jammu & Kashmir, which stands as the world's highest railway bridge. Additionally, the sector has introduced 35 domestically designed Vande Bharat Express trains, with plans to launch six more in the near future. Indian Railways has set the target of achieving Net Zero Carbon Emission status by the year 2030.
Ports
Indian Ports have achieved a remarkable Turn Around Time of 0.9 days, surpassing the performance of ports in the USA (1.5 days), Australia (1.7 days), and Singapore (1.0 days), as per the World Bank's Logistics Performance Index (LPI) Report for the year 2023. This achievement underscores India's growing efficiency and competitiveness in the global maritime sector. Sagarmala initiative aims to leverage India's extensive 7,500 km coastline, 14,500 km of potentially navigable waterways, and strategic positioning along key international maritime trade routes.
Enhanced connectivity from these projects reduces travel time and opens up new areas for development, directly increasing land and property values. It's a win-win situation: better infrastructure leads to thriving real estate.
2. Facilitation of New Developments:
When big infrastructure projects take off, they often spark new residential and commercial developments. For example, the upcoming Navi Mumbai International Airport is expected to boost real estate growth around it, similar to what happened with London's Crossrail, New York's High Line, and China's High-Speed Rail (HSR) expansion and Urban Metro Systems. In India also, the development of Jewar International Airport has led to a massive increase in the value of land property surrounding Yamuna Expressway Industrial Development Authority (YEIDA).
3. Enhancement of Quality of Life and Economic Advancement:
Improving infrastructure also means a better quality of life. It provides easier access to amenities, reduces congestion, and enhances public health and safety. These improvements make cities more attractive places to live and work, drawing in more investments and fostering economic growth. India’s smart city projects blend technology with infrastructure to create sustainable urban environments, making them appealing for real estate investments by improving the well-being of residents.
Housing Demand Spurs Economic Growth
India's construction sector is booming, driven by a surge in housing demand. This increase in demand has positively impacted the overall economy. In the July-September quarter, home sales in India's seven largest cities, including Mumbai, New Delhi, and Bangalore, soared by 36% compared to the previous year, reaching over 112,000 units. This happened despite an 8%-18% rise in prices, according to real estate consultancy Anarock.
Global Investors Favor Indian Real Estate
According to an article on the Business Standard platform, Indian real estate is the most preferred destination for global investors in Asia, as per Colliers. This recognition by international investors speaks volumes about the attractiveness and potential of the Indian real estate market.
Future trends
Looking ahead, the future of India's real estate market appears promising. A recent report by the IMARC group, titled "India Real Estate Market Report by Property (Residential, Commercial, Industrial, Land), Business (Sales, Rental), Mode (Online, Offline), and Region 2024-2032," predicts a compound annual growth rate (CAGR) of 8.03% between 2024 and 2032.
Industry experts and market leaders are sharing their insights on upcoming trends and developments. Key factors like sustainability, technology integration, and changing consumer preferences are expected to shape the future of the industry.
Source: https://www.pexels.com/photo/open-to-new-opportunities-lettering-text-on-black-background-5598293/
Challenges and Seizing Opportunities
While the future looks bright, there are still some hurdles to overcome. Impediments such as land acquisition hurdles, project delays, and funding constraints can slow down the pace and efficacy of infrastructure initiatives and their ramifications for the real estate domain. Nonetheless, endeavors such as policy reforms, heightened engagement in public-private partnerships (PPPs), and exploration of innovative financing mechanisms are underway to surmount these obstacles.
Considerations for Investors :
Research and Due Diligence: It's crucial to thoroughly research and understand the local real estate market, infrastructure plans, and economic trends.
Regulatory Environment: Be aware of the regulatory environment, including land acquisition laws, real estate development regulations, and investment policies, is essential.
Partnerships and Joint Ventures: Collaborating with local developers or participating in joint ventures can offer strategic advantages, especially in markets with complex regulatory landscapes. So think about that strategy as well.
Conclusion
In conclusion, India's real estate market is in a dynamic phase, witnessing a trajectory of growth and resilience. The confluence of factors such as urbanization, infrastructure development, and global investor confidence contributes to the sector's positive outlook. While challenges may arise, the overall sentiment suggests that the Indian real estate market is poised for continued expansion and innovation.
For investors, thorough research, understanding the regulatory environment, and strategic partnerships are key to navigating this dynamic market. The confluence of these factors suggests that despite some hurdles, the Indian real estate sector is poised for continued expansion and innovation, making it a compelling landscape for both domestic and international stakeholders.
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Written & Researched by: Aditi Rawat
