The real estate sector is one of the most globally recognized sectors. Real estate sector comprises four sub sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian (NRI) investments in both the short term and the long term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.
By 2040, real estate market to grow to Rs 65,000 crore (US$ 9.30 billion) from Rs 12,000 crore (US$ 1.72 billion) in 2019. Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13 per cent of 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. Indian real estate increased by 19.5 per cent CAGR from 2017 to 2028.
Sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand for office space in recent times. Commercial office stock in India is expected to cross 600 million square feet by 2018 end while office space leasing in the top eight cities is expected to cross 100 million square feet during 2018-20. Gross office absorption in top Indian cities has increased 26 per cent year-on-year to 36.4 million square feet between Jan-Sep 2018. Co-working space across top seven cities has increased sharply in 2018 (up to September), reaching 3.44 million square feet, compared to 1.11 million square feet for the same period in 2017. New completion of office space is expected to increase 15 per cent to cross 43.6 million square feet in 2019.
The Indian real estate sector has witnessed high growth in recent times with the rise in demand for office as well as residential spaces. Private Equity and Venture Capital investments in the sector have reached US$ 1.47 billion between Jan-Mar 2019. Institutional investments in India’s real estate are expected to reach US$ 5.5 billion for 2018, the highest in a decade. Between 2009-18, Indian real estate sector attracted institutional investments worth US$ 30 billion and received US$ 2.3 billion in first half of 2019. Real estate attracted around US$ 14 billion of foreign private equity (PE) between 2015 and Q3 2019.
During April-June 2019, the gross leasing of office space doubled to 18.7 million sq ft across eight major cities.
According to data released by Department of Industrial Policy and Promotion (DIPP), construction is the fourth largest sector in terms of FDI inflows. FDI in the sector (includes construction development and construction activities) stood at US$ 25.12 billion from April 2000 to June 2019.
Some of the major investments and developments in this sector are as follows:
First REIT raised Rs 4,750 crore (US$ 679.64 million) and was launched earlier in 2019 by the global investment firm Blackstone and realty firm Embassy group.
In January 2019, Ascendas acquired Chennai's Pallavaram IT Park for US$ 35.70 million.
Iconic RK Studios property which is located in suburban Chembur, acquired by Godrej Properties.
New housing launches across top seven cities in India are expected to increase 32 per cent year-on-year by 2018 end to 193,600 units.
In September 2018, Embassy Office Parks announced that it would raise around Rs 52 billion (US$ 775.66 million) through India’s first Real Estate Investment Trust (REIT) listing.
New housing launches across top seven cities in India increased 50 per cent quarter-on-quarter in April-June 2018.
In May 2018, Blackstone Group acquired One Indiabulls in Chennai from Indiabulls Real Estate for around Rs 900 crore (US$ 136.9 million).
In February 2018, DLF bought 11.76 acres of land for Rs 15 billion (US$ 231.7 million) for its expansion in Gurugram, Haryana.
The Government of India along with the governments of the respective states has taken several initiatives to encourage the development in the sector. The Smart City Project, where there is a plan to build 100 smart cities, is a prime opportunity for the real estate companies. Below are some of the other major Government Initiatives:
In order to revive around 1,600 stalled housing projects across the top cities in the country, the Union Cabinet has approved the setting up of an Rs 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF).
Blackstone crosses US$ 12 billion investment milestone in India.
Puravankara Ltd, a realty firm plans to invest around Rs 850 crore (US$ 121.6 million) over the next four years to develop three ultra-luxury residential projects in Bengaluru, Chennai and Mumbai.
Under Pradhan Mantri Awas Yojana (Urban) [PMAY (U)], 1.12 crore houses have been sanctioned in urban areas creating 1.20 crore jobs.
Government has 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 September 16, 2019, India had formally approved 419 SEZs, of which 234 were in operation.
In February 2018, creation of National Urban Housing Fund was approved with an outlay of Rs 60,000 crore (US$ 9.27 billion).
The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform which will help in allowing all kinds of investors to invest in the Indian real estate market. It would create an opportunity worth Rs 1.25 trillion (US$ 19.65 billion) in the Indian market over the years. Responding to an increasingly well-informed consumer base and, bearing in mind the aspect of globalisation, Indian real estate developers have shifted gears and accepted fresh challenges. The most marked change has been the shift from family owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also investing in centralised processes to source material and organise manpower and hiring qualified professionals in areas like project management, architecture and engineering.
The growing flow of FDI into Indian real estate is encouraging increased transparency. Developers, in order to attract funding, have revamped their accounting and management systems to meet due diligence standards.