The real estate industry did very well in 2022. The year can be easily termed as the “turn-around year” for segments such as residential and retail, with all segments recovering from COVID lows and recording strong year-on-year growth. While growth in India has slowed for multinational corporations, domestic demand has remained steady.
According to a report, India’s real estate market is expected to exhibit a growth rate (CAGR) of 9.2% during 2023-2028. Therefore, FY’23-24 will see a strong foundation as there will be more buyers, and home loan rates will be lower. Multiple rating agencies have calculated that the Indian economy is estimated to grow by 8–9%, which will ultimately drive the growth in the real estate market. This growth can be attributed to increasing business activity, improved job markets, and higher income levels, all of which will inevitably lead to a rise in real estate demand.
Along with important policy initiatives such as “Housing for All” and the Pradhan Mantri Awas Yojana, the government has been developing and constructing infrastructure mega-projects like highways, new airports, metros, etc. These factors will stimulate both the quantitative and qualitative growth of real estate holdings. Intriguingly, real estate in Tier 2 and Tier 3 markets will also grow rapidly, generating substantial returns for investors.
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Several prospective buyers are already considering these areas as alternatives to crowded and densely populated cities. Tiers 2 and 3 cities are rapidly establishing themselves as real estate hubs where a thriving housing market continues to support the overall infrastructure construction. In the next fiscal year (FY) 23–24, these cities will be competitive with metropolitan areas and offer a variety of residential and commercial investment opportunities. In addition, in 2023–24, the majority of demand will continue to be for housing, primarily ready-to-move-in.
While rising interest rates are a cause for concern, the desire for larger, more luxurious homes will also see a surge. The popularity of WFH and hybrid working arrangements has increased the demand for vacation houses. We anticipate that these trends will continue in 2023-24.
In recent years, India has made substantial infrastructure investments, facilitating travel, business, and residential exploration. In addition to residential growth, commercial real estate is also one of the sector’s attractive domains. Due to the expansion of the country’s e-commerce industry, the demand for warehouses has increased dramatically. In addition, the government’s PLI scheme is significantly boosting the demand for the warehousing industry, as the production of smartphones, APIs (active pharmaceutical ingredients) and other products are expected to increase substantially. This will further increase the demand for modern warehouses close to these facilities.
Also, to keep up the demand, which is important for the economy, the government should offer tax breaks for people, who buy homes, in the budget. To keep the demand going, each state government should work on waiving stamp duty and registration fees, as a few states have already said they will do.
Lastly, we can say that real estate stakeholders have every reason to think that this sector’s performance in the new year will be stable and robust, especially with the government stepping in to support and promote its growth.
(By Siraj Saiyed, Director, Arete Group)