Real Estate

Introduction

The real estate sector is one of the most globally recognized sectors. It comprises of four sub-sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It was also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term. Bengaluru was expected to be the most favored property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun

Market Size

Real estate sector in India is expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2021 and contribute 13% to the country’s GDP by 2025. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs.

The Indian real estate market is projected to experience a substantial increase, potentially reaching a value of US$ 5-7 trillion by the year 2047, with the possibility of surpassing US$ 10 trillion.

Housing sales across the top seven Indian cities saw a slight dip of 4% in 2024, with around 4.59 lakh units sold compared to 4.76 lakh in 2023, as per ANAROCK data.

In the first quarter of CY25 (January–March), India’s residential real estate market experienced a notable slowdown, with total housing sales across the top seven cities declining by 28% year-on-year to approximately 93,280 units, down from over 1.30 lakh units in CY2024.

In FY23, India’s residential property market witnessed with the value of home sales reaching an all-time high of Rs. 3.47 lakh crore (US$ 42 billion), marking a robust 48%

YoY increase. The volume of sales also exhibited a strong growth trajectory, with a 36% rise to 379,095 units sold.

Indian real estate developers operating in the country’s major urban centers are poised to achieve a significant feat in 2023, with the completion of approximately 558,000 homes.

In 2023, demand for residential properties surged in the top 8 Indian cities, driven by mid-income, premium, and luxury segments despite challenges like high mortgage rates and property prices.

India's physical retail landscape is poised for a substantial boost, with nearly 41 million sq. ft of retail developments set to be operational between 2024 and 2028 across the top 7 cities, encompassing projects in various stages from construction to planning.

For the first time, gross leasing in India's top 7 markets surpassed the 60 million sq ft mark, reaching an impressive total of 62.98 million sq ft, marking a substantial 26.4% increase compared to the previous year. Notably, the December quarter emerged as the busiest quarter on record, with gross leasing hitting 20.94 million sq ft.

CBRE anticipated 14% increase in gross leasing transactions for office spaces across nine major cities in calendar year 2024, with a projected total of 70 million square feet. This growth is attributed to increased demand from both global and domestic corporate entities.

Technology companies held the highest share in leasing activity at 22% during first quarter of 2024.Engineering and manufacturing (E&M) companies accounted for 13%, and banking, financial services and insurance account for 12%. Flexible space operators increase by 48%, showcasing their notable contributions.

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

India’s office sector had a record-breaking 2024, clocking 89 million sq. ft. of gross leasing across the top 8 cities the highest ever. This marks a 19% jump over 2023, surpassing the previous peak by 14 million sq. ft.

In 2023, office absorption in the top seven cities stood at 41.97 million Sq. ft. and Gross Leasing Volume is at 62.98 million sq. ft.

Fresh real estate launches across India’s top seven cities grabbed a 41% share in the first quarter of 2023 (January-March), marking an increase from the 26% recorded in the same period four years ago. Out of approximately 1.14 lakh units sold across the top seven cities in the first quarter of 2023, over 41% were fresh launches.

In 2021-22, the commercial space was expacted to record increasing investments. For instance, in October 2021, Chintels Group announced to invest Rs. 400 crore (US$ 53.47 million) to build a new commercial project in Gurugram, covering a 9.28 lakh square feet area. The transactions of commercial real estate doubled and reached 1.5 million sq. ft. in Q1 of 2023.

According to the Economic Times Housing Finance Summit, about three houses are built per 1,000 people per year compared with the required construction rate of five houses per 1,000 population. The current shortage of housing in urban areas is estimated to be ~10 million units. An additional 25 million units of affordable housing are required by 2030 to meet the growth in the country’s urban population.

Investments/Developments

Indian real estate sector has witnessed high growth in the recent times with rise in demand for office as well as residential spaces.

Chennai’s office stock is set to exceed 100 million square feet by the end of 2026, up from 89 million square feet as of December 2024, making it India’s fifth-largest office market, according to a Coldwell Banker Richard Ellis (CBRE)-Confederation of Indian Industry (CII) Tamil Nadu report.

Indian real estate attracted Rs. 35,300 crore (US$ 4.15 billion) in private equity (PE) investments in 2024, marking a 32% annual increase, according to Knight Frank India’s 'Trends in Private Equity Investment in India 2024' report.

Panattoni is investing Rs. 900 crore (US$ 104.4 Million) to set up a 25-acre Grade-A logistics park in Hosur, Tamil Nadu, marking a major step in its expansion across India.

According to Anarock Capital, Foreign private equity (PE) investments in Indian real estate reached approximately US$ 3.1 billion in FY25, marking a significant increase from US$ 2.6 billion in FY24.

The Private Equity Investments in India’s real estate sector, stood at US$ 3 billion in the first half of 2024.

India’s real estate sector saw a three-fold increase in foreign institutional inflows, worth US$ 26.6 billion during 2017-2022.

Exports from SEZs reached US$ 157.2 billion in FY23 and grew ~28% from US$ 133 billion in FY22.

In July 2021, the Securities and Exchange Board of India lowered the minimum application value for Real Estate Investment Trusts from Rs. 50,000 (US$ 685.28) to Rs. 10,000-15,000 (US$ 137.06 - US$ 205.59) to make the market more accessible to small and retail investors.

Construction is the third-largest sector in terms of FDI inflow. FDI in the sector (including construction development & activities) stood at US$ 60.53 billion from April 2000-March 2024.

Some of the major investments and developments in this sector are as follows:

• In 2024, retail leasing in India reached approximately 6.4 million square feet across the top eight cities, driven by a positive outlook from retailers, especially in the H2 CY24. 
• Construction is one of the largest sectors in terms of FDI inflow. FDI in the sector (including construction development & activities) stood at Rs. 3,94,340 crore (US$ 45.75 billion) from April 2000- March 2025
• Foreign investors pump around US$ 3.1 billion yearly into Indian real estate, with a 37% YoY increase in foreign inflows in the first half of 2024.
• In July 2024, Bangalore emerged as the leading city in the Asia Pacific in having flexible office space stock beating Shanghai and Seoul, while Delhi NCR follows in second place, according to real estate consultant CBRE.
• In 2023, luxury home sales in India priced at Rs. 4 crore (US$ 481,927) and surged by 75%, doubling their share in total housing sales.
• In India's top eight cities, housing prices rose 7% year-over-year due to strong housing demand supported by persistent purchaser demand and steady borrowing rates.
• The Indian real estate sector witnessed strong private equity (PE) investments of US$ 1.92 billion in Q2 of 2023, demonstrating investor confidence in the market. According to the most recent Investment report from Cushman & Wakefield, this was 63% higher than the previous quarter (Q1 of 2023) and 60% higher than the same time last year.
• In July 2023, Delhi-NCR emerged as the third biggest city in the Asia Pacific in having flexible office space stock beating Beijing and Seoul, while Bengaluru retained the top spot, according to real estate consultant CBRE.
• Transactions for office spaces in April-June 2023, which totaled 14.8 million square feet, represented the highest quarterly figure recorded since Q1 2021.
• During the first half of 2023, institutional investments in the office sector increased by 2.5 times year-on-year, reaching US$ 2.7 million.
• In FY23, Delhi-NCR received 32% of the total private equity (PE) investment in the real estate sector.
• Sales in the luxury residential market scaled by 151% year-over-year (y-o-y) in the quarter from January-March 2023.
• Housing sales in top seven Indian cities stood at 1.14 lakh units in Q1 of 2023, an increase of over 99,500 units compared to the same period of 2022.
• In Q1 of 2023, Bengaluru, Delhi-NCR and Chennai together accounted for two-thirds of quarterly demand. At 27%, flexible workspace was the biggest contributor to demand.
• As of June 5, 2023, 119.7 lakh houses have been sanctioned and 74.75 houses have been completed and delivered to urban poor under the Pradhan Mantri Awas Yojana-Urban (PMAY-U).
• Between January-July 2022, private equity investment inflows into the real estate sector in India stood at US$ 3.27 billion.
• Home sales across top eight cities in India surged 68% YoY to reach ~308,940 units in 2022, signifying a healthy recovery in the sector.
• Retail real estate segment attracted institutional investments of US$ 492 million in 2022.

Government Initiatives

Government of India along with the governments of respective States has taken several initiatives to encourage development in the sector. The Smart City Project, with a plan to build 100 smart cities, is a prime opportunity for real estate companies. Below are some of the other major Government initiatives:

• The Union Budget 2025–26 allocated Rs. 1 lakh crore (US$ 11.66 billion) to the Urban Challenge Fund, aiming to transform cities into growth hubs through redevelopment and infrastructure projects.
• Government launches Rs. 15,000 crore (US$ 1.75 billion) funds to revive stalled affordable and mid-income housing projects in Swamih Fund II
• In the Union Budget 2024-25, under PM Awas Yojana Urban 2.0, housing needs for one crore urban poor and middle-class families will be met with a Rs. 10 lakh crore (US$ 120.16 billion) investment, including Rs. 2.2 lakh crore (US$ 26.44 billion) in central assistance over the next 5 years.
• In the 2024-25 Interim Budget, Union Minister of Finance, Ms. Nirmala Sitharaman announced a boost for India's affordable housing sector by adding two crores more houses to the flagship scheme PMAY-U.
• In the Union Budget 2023-24, the Finance Ministry announced a commitment of Rs. 79,000 crore (US$ 9.64 billion) for PM Awas Yojana, which represents a 66% increase compared to last year.
• In October 2021, the RBI announced to keep benchmark interest rate unchanged at 4%, giving a major boost to the real estate sector in the country. The low home loan interest rates regime was expected to drive the housing demand and increase sales by 35-40% in the festive season in 2021.
• Under the Union Budget 2021-22, tax deduction up to Rs. 1.5 lakh (US$ 2,069.89) on interest on housing loan, and tax holiday for affordable housing projects have been extended until the end of fiscal 2021-22.
• The Atmanirbhar Bharat 3.0 package announced by Finance Minister Ms. Nirmala Sitharaman in November 2020 included income tax relief measures for real estate developers and homebuyers for primary purchase/sale of residential units of value up to Rs. 2 crore (US$ 271,450.60) from November 12, 2020, to June 30, 2021).
• In order to revive around 1,600 stalled housing projects across top cities in the country, the Union Cabinet approved the setting up of Rs. 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF).
• Government created an Affordable Housing Fund (AHF) in the National Housing Bank (NHB) with an initial corpus of Rs. 10,000 crore (US$ 1.43 billion) using priority sector lending short fall of banks/financial institutions for micro financing of the HFCs.
• As of December 31, 2022, India had formally approved 425 SEZs, and as of January 2023, 270 SEZs are operational. Most special economic zones (SEZs) are in the IT/ BPM sector.