India’s real estate sector is expected to touch a US$ 1 trillion market size by 2030, accounting for 18-20% of India’s GDP.
The real estate sector in Australia is an important contributor to their respective economies. While there are some similarities between the two countries, there are also significant differences in terms of market dynamics, regulation, and investment opportunities.
SOLID DEMAND:
- India's real estate demand for data centres is expected to increase by 15-18 million sq. Ft. by 2025, according to Savills India group.
- By 2023, Organised retail real estate stock is expected to increase by 28% to 82 million sq. Ft.
- Stipulation for residential properties has surged due to increased urbanisation and rising household income. India is among the top 10 price-appreciating housing markets internationally.
DRIVING ADVANTAGE:
- Indian firms raised >Rs. 3.5 trillion (US$ 48 billion) through infrastructure and real estate investment trusts in 2022, compared with raised funds worth US$ 29 billion as per ICRA estimates.
- Private market investor Blackstone has remarkably invested in the Indian real estate sector (worth Rs. 3.8 lakh crore (US$ 50 billion), is pursuing investing an additional Rs. 1.7 lakh crore (US$ 22 billion) by 2030.
GOVERNMENT POLICIES:
- The government’s initiatives such as the Real Estate Regulation and Development Act (RERA) and affordable housing schemes have further boosted the growth of the sector.
- Steered by increasing transparency and returns, there’s a surge in private investment in the sector.
- Nation's real estate attracted U$ 5 billion in institutional investments in 2020.
- The real estate segment attracted private equity investments worth Rs. 23,946 crores (US$ 3,241 million) across 19 deals in Q4 FY21.
RISE IN INVESTMENTS:
- India registered investments worth US$ 2.4 billion into real estate assets, a growth of 52% YoY in the first half of 2021.
- FDI in the sector of construction development & activities stood at US$ 55.18 billion from April 2000-September 2022.
INTRODUCTION
In India, the real estate sector is one of the most globally recognized sectors. It comprises four sub-sectors – housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the extension of the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third amongst the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.
The real estate sector of India is the second-highest employment creator after agriculture. It is expected that this sector will sustain more non-resident Indian (NRI) investment, both in the short and long term. Bengaluru is expected to be the most preferred property investment destination for NRIs. Followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun. Investment opportunities in the country’s real estate sector are assorted, with options ranging from direct investment in the property to real estate investment trusts (REITs).
MARKET DIMENSIONS
The real estate market will grow to Rs. 65,000 crores (US$ 9.30 billion) from Rs. 12,000 crores (US$ 1.72 billion) in 2019 by 2040. The 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 nation’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 state’s firms are expected to raise >Rs. 3.5 trillion (US$ 48 billion) through infrastructure and real estate investment trusts in 2022 compared with raised funds worth US$ 29 billion. India’s real estate sector saw over 1,700 acres of land deals in the top 7 cities in 1 year. FDI in the commercial real estate sector was at US$ 10.3 billion from 2017-21. Developers expect demand for office spaces in SEZs to shoot up after the substitution of the existing SEZs Act as of February 2022.
According to Savills India, real estate demand for data centres is expected to increase by 15-18 million sq. FT. by 2025. Around 40 million square feet were delivered in India in 2021, and it is also estimated that the country will have a 40% market share in the next 2-3 years. India is expected to deliver 46 million square feet in 2022. In the first half of 2022, office absorption in the top 7 cities stood at 27.20 million Sq. FT.
Between July 2021-September 2021, a total of 55,907 new housing units were sold in the eight micro markets in India (59% YoY growth). Office absorption in the top 7 cities stood at 27.20 million sq. ft. in the first half of 2022. Between July 2021-September 2021, 55,907 new housing units were sold in the eight micro markets in India (59% YoY growth). Indian firms are expected to raise >Rs. 3.5 trillion (US$ 48 billion) through infrastructure and real estate investment trusts in 2022 compared with raised funds worth US$ 29 billion.
In 2021-22, the commercial space is expected 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 commercial space is expected to record increasing investments in 2021-22. For example, in October 2021, Chintels Group announced assembling an investment of Rs. 400 crores (US$ 53.47 million) to construct a new commercial project in Gurugram, covering a 9.28 lakh square feet area.
As per the Economic Times Housing Finance Summit, about 3 houses are built per 1,000 people per year compared with the required construction rate of five. The current housing deficiency in urban areas is estimated to be ~10 million units. An additional 25 million cheap housing units are required by 2030 to meet the rise in the country’s urban population.
INVESTMENTS AND GROWTH
Some of the vital investments and developments in this sector are as follows:
Blackstone, a private market investor, has significantly invested in the Indian real estate sector (worth Rs. 3.8 lakh crore (US$ 50 billion) is seeking to invest an additional Rs. 1.7 lakh crore (US$ 22 billion) by 2030.
Private equity investment inflows into the real estate sector in India stood at US$ 3.27 billion in January-July 2022.
Across seven major cities in India, home sales volume surged 113% YoY to reach ~62,800 units in the third quarter of 2021, from 29,520 units in the same period last year, signifying a healthy recovery post the strict lockdown imposed in the second quarter due to the spread of COVID-19 in the country.
Housing.com, an India-owned online real estate company, partnered with online legal assistance start-ups LegalKart, Lawrato, Vidhikarya and Vakil in 2021 to offer legal advice and assistance to homebuyers.
Mumbai (~39%), NCR-Delhi (~19%), and Bengaluru (~19%)— India’s top three cities attracted ~77% of the total investments recorded in the third quarter of 2021.
To build an investment platform for the Indian retail-led mixed-use assets, in June 2021, GIC announced the accession of a minority stake in Phoenix Mills’ portfolio (worth US$ 733 million).
Institutional real estate investment in India increased by 7% YoY in the third quarter of 2021. Investment registered stood at US$ 2,977 million in the first nine months of 2021, as against US$ 1,534 million in the same period last year.
According to a recent report by Colliers India, private equity investments in Indian real estate reached US$ 2.9 billion in the first half of 2021, which was a >2x increase from the first half of 2020. Also, a property consultant, institutional investments in the Indian real estate sector are expected to increase by 4% to reach Rs. 36,500 crores (US$ 5 billion) in 2021, driven by the rising interest of investors towards capturing attractive valuations amid the pandemic, according to the same.
Indian real estate sector has witnessed a high rise with increased demand for office and residential spaces
GOVERNMENT POLICIES
The central Government of India, along with the governments of respective States, has taken several steps to encourage development in the sector. The Smart City Project is a chief opportunity for real estate companies with the idea to build 100 smart cities. Below are some of the other vital initiatives taken by the Government:
The Reserve Bank of India declared to keep the benchmark interest rate unchanged at 4%, giving a considerable uplift to the real estate sector in the nation. The low home loan interest rates system is expected to carry the housing demand and increase sales by 35-40% in the festive season in 2021.
Under the Union Budget 2021-22, tax subtraction up to Rs. 1.5 lakh (US$ 2069.89) on interest on housing loans, and tax holidays for inexpensive housing projects have been extended until the end of fiscal 2021-22.
The government’s initiatives, such as the Real Estate Regulation and Development Act (RERA) and affordable housing schemes, have further boosted the growth of the sector.
In November 2020, Finance Minister Nirmala Sitharamam announced the Atmanirbhar Bharat 3.0 package, which included income tax relief measures for real estate developers and homebuyers for principal purchase/sale of residential units of value up to Rs. 2 crores (US$ 271,450.60) from November 12, 2020, to June 30, 2021.
The government has created an Affordable Housing Fund (AHF) in the National Housing Bank (NHB) with an initial corpus of Rs. 10,000 crores (US$ 1.43 billion) using priority sector lending shortfall of banks/financial institutions for micro-financing of the HFCs.
India formally approved 425 SEZs, of which 265 were already operational. Most special economic zones (SEZs) are in the IT/ BPM sector as of January 31, 2021.
THE FUTURE AHEAD
The real estate sector of India has been growing at a fast rate due to factors such as urbanization, population growth, and increasing disposable incomes. The Indian real estate sector in 2035 is likely to be influenced by a variety of factors, such as government policies, economic growth, demographic changes, technological advancements, and global events. Additionally, there is an increasing focus on sustainability and green buildings, driven by government policies and consumer demand. The estimated growth of housing units in urban areas will increase the demand for commercial and retail office space. The residential sector is expected to grow significantly. The central government aims to build 20 million affordable houses in urban areas by 2022 under the aspiring scheme, Pradhan Mantri Awas Yojana (PMAY) of the Union Ministry of Housing and Urban Affairs. 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. The current housing shortage in urban areas is estimated to be ~10 million units. By 2030, to meet the hike in the country’s urban population, an additional 25 million units of cheap housing are required.
The Securities and Exchange Board of India (SEBI) has declared the Real Estate Investment Trust (REIT) platform, which permits all kinds of investors to invest in the Indian real estate market. This would create an opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in the Indian market in the coming years.
In Australia, the real estate sector has traditionally been a major contributor to the country’s economy. The sector has shown resilience even during economic downturns, making it an
attractive option for investors. The commercial real estate segment in Australia is also expected to grow, driven by demand for office spaces and the growth of the technology and innovation sectors.The demand for residential properties is expected to remain strong, driven by low interest rates and a preference for home ownership.The commercial real estate segment is expected to continue growing, driven by demand for office spaces and the growth of the technology and innovation sectors.
The Australian real estate market offers high-quality properties, which are often in desirable locations, such as major cities and coastal areas. These properties can provide attractive long- term capital growth potential. Australia’s real estate market is well-regulated, transparent and stable, with a reliable legal system, which makes it attractive to foreign investors. This provides a level of security for investors looking for a stable investment environment.