In a news that has brought cheers to the Indian realty market, Knight Frank and CII have reported that the sector will grow three-fold in the coming decade and is expected to reach USD 1.5 trillion by 2034, contributing 10.5% of the country’s total economic output, translating a phenomenal increase of 3.2%. At present, the sector’s contribution to the GDP is 7.3%.

On a deeper data analysis, the report shows that the residential segment is expected to reach USD 906 billion by 2034. The contribution of the office segment, on the other hand, is expected to be USD 125 billion. It is followed by land for manufacturing activities and warehousing.

Residential Realty Segment

Among the primary factors that make these figures easily attainable is the economics of growth based on the country’s demographic increase. As India’s population is expected to reach 1.55 billion by that year, an estimated 42.5% of the population will reside in urban centers. It will provide a fillip to the real estate sector and create demands for both residential and commercial spaces. The report also indicates that to accommodate the consequent increase urban population will require an additional 78 mn housing units between 2024 and 2034. It will act as a major booster for the real estate sector.

Further, the country’s rapid economic growth in the same period will lead to an increase in income of the broad spectrum of society, which in turn will further stimulate demand. Since a substantial portion of the population will constitute the lower-middle and upper-middle-income groups, it will create a huge housing demand in the affordable segment, which will make it a segment with immense potential.

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The Indian real estate sector is undergoing a paradigm shift, propelled by the transformative power of the Real Estate Regulation and Development Act (RERA). This act transcends mere regulatory intervention, acting as a catalyst for a more robust and investor-centric market environment. RERA’s impact is multifaceted, fostering a culture of transparency through standardized pricing models and mandatory escrow accounts. These accounts function as a financial bulwark, ensuring at least 70% of buyer funds are demonstrably channeled toward project completion. This significantly mitigates the previously pervasive risk of developer insolvency, a factor that previously impeded investor confidence.

Additionally, RERA streamlines the dispute resolution process, empowering buyers and fostering a predictable legal framework. This fosters a more institutionally robust environment, attracting Foreign Institutional Investors (FIIs) and Non-Resident Indians (NRIs) who seek stable and secure investment opportunities. Ultimately, RERA’s multifaceted approach positions India’s real estate sector as a compelling proposition for discerning investors seeking long-term value and growth potential.

Besides, the proportion of High-Net-Worth Individuals (HNIs) and Ultra High Net Worth Individuals (UHNIs) households in India is expected to rise from 3% to 9% by 2034. This in turn will drive significant demand for luxury and ultra-luxury housing.

Commercial Realty Segment

From 278 mn sq. ft. office stock in 2008 to more than 900 mn sq. ft at present, the top 8 cities in India cumulatively accounted for a big chunk of the rise in office spaces. The rise of the young population and increase in economic activities will also lead to the creation of new urban centers, necessitating the need to accommodate economic activities, which inter alia will promote the growth of office segments. As per the report, it will create an additional requirement of 1.7 bn sq. ft. space in the next decade. It will require around 2.7 bn sq. ft. of office space by 2034. Tier 2 and 3 cities such as Lucknow, Chandigarh Tricity, Agra, etc. have also witnessed a rising demand and supply for office real estate in the last few years.

Foreign Investments

Foreign participation is also rising in India’s real estate sector. It is estimated that NRIs have invested US $13.1 bn in buying homes in India, and by 2025, they are expected to contribute a substantial 20% to the country’s total real estate investments. As far as the office segment is concerned, global investors have infused an average of $4 bn annually in the last five years. It is worth highlighting those foreign investors made 90% of investment in India’s office segment in 2023. Much of it is due to the inherent strength of the class and India’s phenomenal growth story.

As the sector scales up, the potential revenue generation from India’s office real estate is estimated to be US$ 125 bn in 2034.

NCR – Realty Powerhouse

NCR is one of the major regions in India that is witnessing immense traction in real estate. Spread over 55,000 sq km, almost every part of the region is witnessing a realty boom and a steady rise in new supply. With a total of 20,572 units launched in 2023, the new supply grew by an impressive 34% in the year. Of this, over 34% of the total launches were positioned in the INR 1-3 crore price segment. The robust supply was met with a commendable response from homebuyers, as a total of 21,364 units were sold in 2023, depicting a YoY growth of 11%.

The realty sector in the coming decade is poised for a big leap. Riding high on the country’s economic growth, demographic dividend, and rising aspirations, the sector is going to witness huge traction not just by increasing its share in India’s GDP but also by fulfilling people’s dream of a home and contributing to India’s growth story.

(By Harinder Singh Hora, Founder and Chairman, Reach Group)

Disclaimer: Views and facts expressed above are those of the author. They do not necessarily reflect the views of financialexpress.com.