In home and office, India's real estate market is charting a course for growth

India’s real estate market is poised for growth across categories – residential, commercial, and rental.

Currently valued at Rs 24 trillion, or about $300 billion, it is projected to surge to $1.3 trillion by 2034, and then grow further to $5.17 trillion by 2047, indicates a report by the Confederation of Real Estate Developers Associations of India (Credai).

Digitisation, sustainability initiatives, and the evolving spending patterns of millennials are the key factors shaping the sector’s trajectory.

In the residential domain, a resurgence post-pandemic is evident, characterised by robust market demand buoyed by
both buyer confidence and favourable economic conditions.

Developers are wooing buyers with attractive financing options and incentives like zero floor rise charges, catalysing interest in property investments.

In the office segment, the emergence of global capability centres (GCCs) and adaptable workspaces is anticipated, with companies prioritising quality spaces while balancing costs.

The retail real estate sector, meanwhile, is witnessing collaborations between international luxury brands and local entities to tap into new markets, enriching the experiential retail landscape.

And the demand for warehousing facilities is being driven by multipolar supply chain strategies, favouring plug-and-play infrastructure for seamless operations and reduced capital expenditure in industrial clusters.

Dwelling on

The residential sector saw significant growth in sales and new launches during 2023 and Q1 of 2024, according to real estate consultancy Anarock.

This growth trajectory is expected to persist well into 2024, indicates Anarock’s Consumer Sentiment Survey conducted earlier this year.

Within the luxury housing segment, across the top seven cities, 476,530 units were sold in 2023, with about 119,130 of them, or 25 per cent, designated as luxury homes costing upwards of Rs 1.5 crore.

This was 7 per cent more than the proportion of luxury sales in 2022.

The Anarock survey found a discernible preference among buyers for larger homes, with 50 per cent of the respondents keen on 3BHK properties – up from 42 per cent in the survey’s H2 2022 edition.

The influx of millennials with increasing disposable incomes is among the factors fuelling demand for luxury apartments and comprehensive amenities within housing societies.

Also, infrastructure projects, including new airports, metro routes and arterial roads, will determine intra-city home buying patterns, leading to significant value appreciation in catchment areas along project corridors, says Vimal Nadar, senior director and head of Research, Colliers India.

He is of the view that affordable and mid-segment housing will remain the mainstay of residential activity in India.

“The likelihood of a repo rate reduction in 2024 augurs well for the EMI-dependent buyer and helps maintain traction in residential real estate throughout the year,” Nadar says.

Project launches and sales activity are likely to pick up pace in peripheral areas of Tier-I cities, he adds.

Incentives and the revival of schemes such as “buy now and pay later” will be pivotal in micro-markets with high average property values, especially in cities such as Mumbai, Nadar adds.

Of all the housing categories, luxury is likely to witness accelerated demand in 2024 as well, Nadar says.

The preference of high networth individuals (HNIs) for second homes, including vacation homes, will aid developer expansion beyond Tier-I cities, he adds.

“With the recent Sebi SM-Reit guidelines, fractional ownership of luxury residential properties may get a boost in the near midterm.”

Plotted developments, too, are expected to witness traction in the peripheral areas of smaller cities, he says.

The office scene

CBRE anticipates the office market to also remain resilient in 2024 despite global economic uncertainties.

With a focus on quality and cost efficiency, occupiers are seeking prime  office spaces to expand and consolidate operations, the consultancy says, with the return-to-office trend adding to the anticipated demand.

Traditional hubs such as Bengaluru and emerging centres like Chennai are witnessing heightened interest, fuelled by the availability of talent and competitive rentals.

Sectors like BFSI (banking, financial services and insurance) and engineering and manufacturing are driving growth, spurring demand for modern office parks.

Additionally, growth is expected from flexible workspace providers and technology firms.

“In the office market, occupiers will continue to adopt a ‘core plus flex’ strategy,” says Nadar.

“Demand from GCCs and flex operators will remain strong in the next few quarters.”

Colliers says Grade A space uptake, particularly from US and EU occupiers, is set to surge.

Flex operators, it adds, are expanding nationwide, focusing on Tier-II and III cities to address the demand-supply gap.

With 13.6 million sq ft absorbed in Q1 2024, the top six cities are on track for another year of more than 50 million sq ft leasing activity, Colliers says.

Among the trends, real estate consultancy CBRE underscores the prominence of digitalisation, citing virtual tours and data-driven searches as standard practices for enhanced efficiency.

Sustainability emerges as a significant concern, with developers and buyers alike favouring eco-friendly features such as rainwater harvesting and energy-efficient appliances.

“In an era of heightened ecological consciousness, occupiers have been prioritising sustainability through various measures such as green-certified buildings, sustainable procurement, water and waste management, and energy efficiency,” says Anshuman Magazine, chairman and CEO-India, South-East Asia, Middle East and Africa, CBRE.

With benefits ranging from lower operating costs, improved employee health and enhanced brand image, a higher number of occupiers, he adds, are likely to prefer green-certified buildings for new leases.

Analysts expect an upward trend in rentals as well.

Anarock chairman Anuj Puri says that with post-pandemic rental demand soaring after offices resumed, rental yields are heading north, especially in cities such as Bengaluru, Gurugram, Pune, Noida, and Mumbai Metropolitan Region.

“This growth is likely to continue in the coming quarters.”

From the look of it, the real estate sector is on solid foundation.