Real estate market in India is booming at an exponential rate. After the slowdown for two consecutive years caused by the global Covid-19 outbreak, the sector is making a phenomenal comeback – registering unprecedented growth. Currently, real estate is one of India’s most prominent industries in terms of generating revenue and employment opportunities. Industry experts view 2023-24 as a boom year for India’s property market.
Real estate – one of the ever-booming sectors in India. The reasons are manifold – the rising middle class, the affluent upper-middle class, India’s emergence as an economic superpower, rapid urbanisation, increased employment opportunities in cities… Together, all these contribute to the phenomenal growth of the sector in India. In fact, India has one of the fastest growing property markets in the world.
Table of Contents
Covid-19 and its Impact on Indian Real Estate Sector
Owing to the Covid-19 outbreak, property markets around the world have seen massive setbacks. The situation was not different in India. Thus, in the years 2020 and 2021, India has seen a dip in growth for the real estate sector. It is estimated that the outbreak, which has brought the country to a standstill, has caused a loss of over Rs. 1 lakh crore to the property market. As per a report by India Ratings, the first half of the year 2021 saw residential demand declining by 40%.
The Resurgence of India’s Property Market
Despite a two-year long slump, the property market in India saw an incredible comeback in 2022, setting new sales records of 68% year-on-year. It further establishes real estate as one of the fastest growing industries in the country. As per industry reports, the first half of the financial year 2022-23 saw seven prime residential markets in the country registering the highest sales in the last 10 years. According to industry veterans, in 2023, the property market will see robust growth with renewed interest among NRIs and millennials to invest in real estate.
Real Estate Market in India at a Glance
Various reports suggest that the property market in India will exhibit a compound annual growth rate of 9.2% during the period between 2023 and 2028. According to industry veterans, 2023 will be a momentous year for the industry. In 2021, the size of the Indian property market was USD 200 billion. Projected growth by 2030 for the sector is USD 1 trillion. What is more, by 2025, the real estate sector is expected to contribute 13% of the country’s total GDP.
Real Estate Market in India 2022
In 2022, the size of the Indian property market was USD 256.8 billion. In the coming years, the figure is expected to reach new heights, thanks to policy changes and the predicted economic growth. The figure comprises the total value of both residential and commercial properties.
Market Size of Real Estate in India Over the Years
Over the years, the property market in the country has scaled new heights, generating more revenue, thus making it one of the most important sectors in the country. Here is a glimpse of the growth story.
Year |
Market sizeBillion dollars |
Market sizeINR, 1000 crores |
|
2008 |
50 |
410 |
|
2017 |
120 |
984 |
|
2020 |
180 |
1,476 |
|
2025 |
650 |
5,330 |
|
2030 |
1000 |
8,200 |
Source: https://www.statista.com/statistics/955598/india-real-estate-industry-market-size
Policy Reforms and Regulatory Environment that Spurred the Growth of Real Estate Sector
As we have already seen, the Indian property market is expanding rapidly. While an increase in the earning potential of the middle class and a growing aspiration among the customers can be partially attributed to the growth of the sector in India, it is also spurred by governmental policies and regulations. Let’s take a look at some of the reforms and regulations that have been pivotal in the growth of the real estate industry in the country.
Real Estate (Regulation and Development) Act (RERA)
The Real Estate Regulatory Authority introduced the Real Estate (Regulation and Development) Act (RERA), which came into existence in March 2016. Intended to provide transparency and accountability in the sector, RERA protects the interest of all the stakeholders involved and ensures speedy resolution in case of disputes. Naturally, homebuyers are more confident investing their money in the market.
Amendment to the Benami Transactions Act
Benami transactions were common in the real estate sector. However, an amendment to the existing Benami Transactions Act gave teeth to the act, making it more stringent. The act further enhanced India’s status as an investment destination by instilling professionalism, accountability, and greater transparency in transactions.
Goods and Services Tax (GST)
After prolonged deliberations, the central government rolled out the eagerly awaited Goods and Services Tax on July 1, 2017. The major impact of GST was that it made homebuying simpler by removing the complexities of multiple taxes by subsuming a slew of indirect taxes such as excise duty, VAT, and service tax. In turn, it helped the homebuyer reduce their tax outgo by nearly 11%.
Permanent Residency Status for Foreign Investors
In order to encourage foreign direct investment in the country’s property market, government of India offers permanent residency status for foreign investors for a period of 10 years. To be eligible, investors should fulfill certain conditions. This major move is attracting foreign investors on a large scale to the country, strengthening the booming property market further.
Foreign Direct Investment (FDI) in Real Estate
For long, real estate has been one of the most protected industries in India. But the decision of the government to allow foreign direct investment in the sector under the automatic route is bringing a massive change to the country’s property market. FDI is also expected to pave way for certain international trade practices into India’s real estate sector.
Infrastructure Status to Affordable Housing
The government of India’s decision to grant infrastructure status to affordable housing has given a fillip to the sector. As a result, such projects can avail low borrowing rates, tax concessions, and increased capital inflow – private as well as foreign.
100% Deduction in Profits for Affordable Housing Construction
Housing costs in the cities, especially major cities such as Mumbai, Delhi, Bangalore, etc., have been skyrocketing, making it beyond the reach of people who come under low-income brackets. Applicable to flats up to 30 square metre in metro cities and 60 square metre in non-metro cities, this proposition will encourage developers to create affordable housing.
Emerging Trends and Shifts in Real Estate
Like other verticals, the real estate sector is also undergoing massive change. With the rise of technology, consumers are no longer looking for just luxury; smart homes are high on demand. On the other hand, property technologies such as PropTech are changing the way individuals and organisations research, buy, sell, and manage real estate.
Yet another significant change in residential properties is the shift towards sustainable homes. Be it in terms of the materials used, providing provisions for sustainable living, or ensuring that the resources are judiciously used, sustainable homes are gaining widespread popularity, prompting leading developers to embrace the change.
One of the lasting effects of Covid-19 can be seen in the way organisations work. While the pandemic forced companies to stay shut, resulting in the emergence of the work-from-home culture, post Covid-19, work from home has been seen making way for the hybrid work culture. As a result, the demand for co-working spaces and flexible office solutions are hitting a new high. Major companies, including IT/ITeS organisations and start-ups are opting for flexible office spaces. As per a report by property consultant, Anarock, in the first quarter of 2023, of the total 8.2 million square feet office space across the top seven cities in India, the share of co-working space has been 27%, which, unequivocally reiterates the growing demand.
The growing e-commerce sector is rapidly changing the retail landscape as we know it. Consequently, there is a higher demand for commercial real estate. Factors that contribute to the growth of commercial properties, owing to the growth of the e-commerce industry include increased demand for warehouses and distribution centres, need for smaller retail spaces and pop-up shops, etc.
Indian Real Estate Sector: Investment Opportunities and Market Outlook
Leading experts in the Indian property market is viewing 2023-24 as a booming year for the industry. According to them, in the next nine months, there will be 10-15% hike in sales collectively in residential, commercial, and retail segments. With the demand for housing on the rise, it’s a sure bet to invest in residential real estate. Likewise, both commercial and retail segments are rapidly expanding, thanks to the immense growth in the respective sectors. Obviously, for investors, it is the right time to add real estate in their portfolio.
Besides the four metros and Bangalore, a range of new destinations have emerged as destinations for investing in properties in India. They are Gurugram, Noida, Pune, Hyderabad, Faridabad, Lucknow, Chandigarh, and Ahmedabad. The emergence of these cities as new real estate investment destinations can be attributed to a plethora of reasons such as increased connectivity, growing opportunities, and well-planned infrastructure.
Ever since India’s property market was thrown open for foreign direct investment, the sector has been witnessing a significant inflow of investments. Of late, it has been touching new heights. For instance, in the period between 2017 and 2022 there has been a three-fold increase in foreign institutional inflows, attracting USD 26.6 billion. This amounts to 81% of the total investments in the sector during the period.
As we have already seen, the property market in India is poised to grow immensely in 2023 as well as in the years to come. According to reports, the period between 2023 and 2028, the sector will register a compound annual growth rate of 9.2%. Since work-from-home and hybrid models have already gained popularity, there is a growing tendency among customers to move away from the city and opt for larger homes in the suburbs. Yet another trend is the integration of living spaces and office spaces. Developers now offer dedicated office spaces in the clubhouse or as a separate space. In addition to this, they also offer provisions for home offices in individual units.
India’s Property Market: Challenges and Risks
Though property market in India is one of the most booming sectors, it is not devoid of challenges and risks. Let’s take a look at them. One of the biggest challenges faced by the sector is the high dependency on workforce. As per reports, in 2023, there was a 15-25% shortage of workforce in the construction sector. The shortage can be risky as it may cause delays in delivering the project on time, in which case it will further lead to legal complications. Other challenges include increased price of construction materials, unavailability of land, as well as the complex procedure to acquire land.
Ever since the introduction of RERA, developers have been required to adhere to the regulatory compliance and provide accurate and timely information to customers regarding the status of the project, its progress, and completion date.
With banks setting stringent norms for real estate lending, it is difficult for developers to finance their projects. Yet another concern is liquidity, if the asset is not being sold within the set timeframe, it will result in loss for the developer.
Finally, with growing awareness about the need for sustainability practices to protect the environment, property developers are finding ways to be compliant, resulting in increased cost, and time.
Indian Real Estate Sector: The Way Forward
As we are about to conclude, let’s look at the main points once again. Real estate sector in India is poised to grow immensely. Also, the way consumers look at their homes have changed over the years. While luxury was quite attractive earlier, the new-age consumers opt for luxury smart homes as well as sustainable luxury homes. From the investors’ point of view, the time is just perfect to invest in properties. However, it can be challenging, navigating through the rapidly changing property market, which includes residential, commercial, and retail sectors.
FAQ’s
1. Does real estate have a future in India?
Real estate is one of the fastest growing sectors in India. Hence, investing in real estate is one of the most surefire ways to build wealth. The future of real estate is bright in India.
2. What is the future of real estate industry in India?
As per various reports, real estate in India is poised for immense growth. In fact, 2023 is considered as a boom year for real estate. Considering these facts, the future of real estate industry in India is great.
3. What is the future of real estate in India 2025?
Various thinktanks and experts have predicted steady growth for the real estate sector in India in the coming years. In fact, many regard the current year as a momentous year for the industry. Hence, in 2025, the real estate sector is likely to set new sales records.
4. What will Indian real estate be in 2030?
The year 2023 will witness a watershed moment for India’s real estate sector. As per reports, India’s real estate industry will reach USD 1 trillion by 2030. Obviously, the future of Indian real estate industry is exemplary.
5. Will property prices fall in 2023 India?
2023 is considered as a year for unprecedented growth for the real estate sector in India. Hence, it is quite unlikely for property prices to fall in India.
6. Will real estate prices fall in 2023 in India?
Real estate sector in India is booming. In the first half of the current financial year, sales in the sector have skyrocketed. Quite naturally, it would be safe to assume that real estate prices will not fall in India in 2023.
7. Will real estate boom in India?
Various studies and trends are showing an upward growth trajectory for real estate in India. In fact, 2023 is regarded by prominent experts as a boom year for real estate in the country. Obviously, it would be safe to say that real estate will boom in India.
8. In which city in India real estate is booming?
Owing to increased opportunities in cities, along with other factors, real estate is booming in major cities in the country. They are Kolkata, Mumbai, Delhi, Chennai, Bangalore and Hyderabad. Besides these, other cities where real estate is booming are Gurugram, Noida, Pune, Faridabad, Lucknow, Chandigarh, and Ahmedabad.
9. Is 2023 a good year to buy a house in India?
2023 is being called as a boom year for Indian real estate market. Obviously, there will be increased demand and price. However, buying now is a better option since prices are expected to grow in the upcoming years.
10. Is real estate worth in India?
As an investment, real estate is worth in India. The main reason for this is the growing appreciation. A property you buy today will give you multifold returns in a few years from now.
11. Is real estate profitable in India?
Real estate is indeed profitable in India, considering the ever-growing demand for housing. In fact, one of the best ways to beat inflation is to invest in real estate as the ROI will surpass inflation rates by miles. This way, you can ensure that your money grows for sure.
