India’s Current Real Estate Market

India’s Current Real Estate Market

Real Estate market is the second-largest employment generator in the country, right after agriculture. Only 2 other major sectors best the combined impacts of the construction industry on the Indian economy. Split between housing, retail, commercial, and hospitality subsectors, Real Estate in India had seen a significant boom pre-Covid – due to the increasing need for corporate workspaces and urban/semi-urban accommodations.

 

With the onset of the pandemic, much of the workforce was either rendered jobless or were forced to work from home. The labor shortage, as a result, stalled many ongoing projects, and the dwindling share market caused more people to hang onto their money and not invest in real estate. Combined, these two major factors ground the demand for real estate to a halt. The ripple was felt especially in the housing sector – as India slipped 7 places to 54 in Knight Frank’s global house pricing index between July – September in 2020. India was also the weakest performing country in the world in the year to Q4 2020, with its housing market shrinking 3.6%.

India’s Current Real Estate Market

Two domestically developed vaccines, 117 Crore+ vaccinations, and a global market recovery has brought back high hopes for the real estate industry in India.

 

Current Market Scenario – Signs of Recovery?

 

While the pandemic is far from over, there are some encouraging statistics in the real estate sub-sectors in 2021:

 

  • JLL Group reports that the residential market in Q2 2021 saw a resurgence, with 83% YoY improvement compared to last year for new launches and sales both, with the sales numbers double that of Q2 2020. At the same time, the office market reported an increase of 19% YoY for sales. New constructions increased substantially to 102%.
  • In H1 2021, the Indian real estate sector saw investments of $2.4 Billion, a 52% increase YoY.
  • Colliers India, a leading property consultant, projects institutional investments in the Indian RE sector to reach Rs. 36,500 crore in 2021, an uptick of 4% – driven by investors cashing in on attractive pandemic-time valuations. Colliers also reports that private equity investments have already more than doubled in H1 2021 compared to 2020, to a staggering US$ 2.9 billion.
  • The Securities and Exchange Board of India lowered the minimum application value for Real Estate Investment Trusts (ReITs) and Registered Infrastructure Investment Trusts (InvITs) from Rs.50,000 and Rs.1,00,000 to Rs.10,000-15,000 in July 2021. As a result, the market has become more accessible to small and medium retail investors.
  • Tax relief measures for individual property buyers and real-estate developers in the 2021-22 budget and in the Atmanirbhar Bharat 3.0 package are equally lucrative. These steps should make developing properties and owning them much more pocketable this year compared to last year.

India’s Current Real Estate Market

Is Real Estate Out of the Covid Hole Yet?

 

By 2030, the real estate sector is expected to reach a market size of US$ 1 trillion, compared to US$ 120 billion in 2017. It will contribute a substantial 13% to India’s GDP by 2025. As more people start returning to offices and the demand for urban and semi-urban residential properties comes to normal levels, real estate in India is bound to see substantial growth in the coming quarters. E-commerce, FMCG, healthcare, and IT continue to drive the growth in the office market. Moreover, with more institutional investors putting their money behind projects and financial organizations lowering interest rates for their home loan products, the real estate industry has started to turn around and be lucrative for both developers and buyers alike.

Yanik Upasani

The New Door

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