Indian real estate sector stands at an exciting juncture. Having weathered the COVID-19 storm, it had to deal with new challenges in 2022. The rising cost of inputs, the current geopolitical situation, and the mounting interest rate are all problems that the sector had to face. In addition, IMF predicted that India’s economic growth would increase by 6.8% in 2022, down from 7.4% in July to 8.2% in January. This was followed by World Bank reducing India’s GDP forecast for the current fiscal year to 6.5% earlier this month.

Last month, the Reserve Bank of India estimated a real GDP of 7%. Most pundits believed that this would have an adverse impact on real estate. However, the sector market has maintained strong and positive momentum in the fiscal year 2023 (FY 23). Residential sales and launches in the first nine months of 2022 exceed the pre-pandemic annual number.

The pandemic led to the realisation of owning a house of their own, hybrid-work mode, and attractive pricing and discounts offered by the developers helped boost the sales momentum. With more AI being used, the real estate industry is also undergoing a technological change. The demand for real estate in Tier 2 and 3 has been increasing rapidly. Several prospective purchasers are already considering these areas as an alternative to the overpopulated and polluting metropolitan areas. Tier 2 and 3 cities are quickly establishing themselves as real estate hubs where a thriving housing market continues to support the construction of the overall infrastructure.

The Uber-Luxury lifestyle

The luxury market was the main driver of growth in real estate in 2022, and this will continue in 2023. There will be an increase in demand for larger, luxury houses. The increasing popularity of WFH and hybrid working models boosts demand in this market sector. Despite rising home prices, the demand for homeownership remains robust. Younger and first-time homebuyers will dominate the real estate market. Commercial real estate is also showing signs of increased growth. Organised retail real estate stock is expected to increase by 28% to 82 million sq. ft. by 2023. NRIs have been inspired to invest in Indian real estate by global headwinds. This trend has picked up speed because the Indian rupee has lost value, and the economy is doing well. Demand for residential properties has surged due to increased urbanisation and rising household income. India is among the top 10 price-appreciating housing markets internationally.

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Digital revolution

Increased digitisation; before the outbreak, digital platforms existed; nevertheless, the necessity for these platforms surged across all industries during and after the outbreak. The demand for data has skyrocketed, and with that, there is a greater need for data centres. Real estate demand for data centres is expected to increase by 15-18 million sq. ft. by 2025.

Sustainability quotient

Climates growing impact on real estate. Environmental, social, and governance (ESG) investing disclosure is under increasing pressure from real estate owners and investors. In the post-pandemic world, homebuyers are more cognizant of their carbon footprint and ecosystem and thus seek homes that reflect their approach. Most homebuyers are even willing to pay a premium for a green home.

Green homes that balance nature living will continue to be in demand in 2023. Along with the health benefits, these houses improve the quality of life and offer lower operational costs and higher resale value. Given the many advantages that sustainable buildings offer, homebuyers will continue to favour these in 2023 and beyond.

Remote working is here to stay

While the pandemic is now a thing of the past, the remote working culture is here to stay. Many companies still continue to function in a hybrid mode and allow employees to work from where they want. The popularity of holiday homes has shot up significantly, and the remote working culture is fueling the same. As people continue to work in the hybrid mode, they will continue to operate from offbeat locations, allowing them to be more flexible and enjoy a better work-life balance.

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Long-term asset and appreciation

The current geopolitical situation and the uncertainty surrounding us also encourage people to invest in real estate. Most people see real estate as a real asset. The volatility in the markets and changing landscape drive many to invest in real estate, enabling them to fetch good resale value and appreciation in the long run. Investment in various infrastructure projects by the government is another enabler of this trend.

Real estate has witnessed its ups and downs. Investors again realise the benefits of investing in real estate since it is not considered speculative or high-risk. In terms of quantity and quality, growth is anticipated to be good in 2023. According to industry experts, interest rates will play a significant role in altering the real estate business.

(By Aditya Kushwaha, CEO & Director, Axis Ecorp)