Here are some key points about the real estate sector in India :
1. Population Growth : India has witnessed significant population growth over the years. The population growth rate in India has been gradually declining but remains substantial. According to estimate from the United Nations India is going to be most populated country in the world. to absorb this large population India need massive infrastructure and sustainable development and lots of real estate development.
Reference -United Nations - World Population Prospects
Increasing housing demand: As the population grows, there is an increased demand for housing, more people require place to live which leads to a higher demand of residential properties. the increase demand can drive up property price and rentals.
Increasing urbanization and land development: The population growth contributes to urbanization, leading to the expansion of cities and the need for infrastructure development. The demand for commercial spaces, retail centre's, and other urban facilities increases as the population grows, driving the development of real estate projects to cater to these needs.
infrastructure development: The growing population requires the development of infrastructure to support the needs of the expanding urban areas. This includes the construction of roads, bridges, public transportation systems, healthcare facilities, educational institutions, and recreational spaces. Real estate development plays a vital role in fulfilling these infrastructure requirements.
Affordable housing demand: The growing population has emphasised the need for affordable housing options. The government, developers, and financial institutions are increasingly focusing on providing housing solutions that cater to the middle and lower-income segments of the population.
Mixed used development : The growing population leads to increased economic activities, including the establishment of businesses, offices, retail outlets, and other commercial ventures. This drives the demand for commercial real estate, including office spaces, shopping malls, and industrial parks.
2. urbanization : Urbanization increases demand of housing, demand of land and development, required more infrastructure to support growing population, increase demand of affordable housing and mixed used development increase rentals of existing properties .
Rapid urbanization is also the biggest contributor in the growth of Indian real estate. Nearly 31% of India's current population lives in urban areas. Urban areas are expected to be home to around 40% of India's population and are going to contribute around 70% to Indian GDP by 2030. By 2050, Around 53% of India's population will be staying in urban areas. to accommodate this large population India needs to pace and construction , housing, commercial and infrastructure
Metro City is also expanding with fast pace, Metropolitan city is also expanding in terms of size and population. Apart from metro cities, Tier 2 , Tier 3, and Tier 4 cities will also witness significant growth in terms of population and size.
As per a report by financial express 25 million units of affordable housing will be required by 2030. due to urbanization, population growth , the Government of India is planning to develop 100 smart cities.
Migration : As per the data , Migration in India are at highest pace, People are migrating from small town to cities , from Cites to Metro.
these are the main reasons for migration.
Income: people are migrating from small cites to tie2, tier 1 or to Metro cites.
The all-India migration rate was 28.9% for July 2020-June 2021, with a 26.5 % migration rate in rural areas and 34.9% in urban areas.
Females recorded a higher share of migration rate of 47.9%; 48% in rural and 47.8% in urban areas.
Migration rate for males was 10.7%, with 5.9% in rural and 22.5% in urban areas.
86.8% females migrated for marriage while 49.6% of the males migrated in search of employment.
There are four major reason for migration :
Work & Employment, Business ,Education ,Marriage
3. Nuclear family: This is also one of the very important growth reasons for Indian real estate. Nuclear families typically consist of a couple and their children, resulting in a smaller size of household and this has led to shift in housing demand, typically more nuclear families looking for separate/ personal homes for themselves resulting in an increase in demand for compact and affordable housing units.
Nuclear families often prefer living in apartments or in gated communities due to factors like security, play areas, clubs, facilities and other shared amenities .
As per latest report in urban areas more than 88% families have 3-4 members and there are no senior citizens in these households. In rural India the share of nuclear families also rose from 50.7% to 52% and the pace of changing this trend is sharper than the urban area which is resulting in more demand in the housing sector.
4. Easy Finance: The availability of easy finance or favorable finance options can have a significant impact on the demand of real estate. there are four major factors which is leading to an increased demand in real estate.
Increased Affordability: Easy finance options such as low-interest rates, longer loan tenures, and flexible repayment terms can make real estate more affordable for buyers. Lower borrowing costs and favourable financing terms can attract more potential buyers into the market, leading to increased demand for real estate. Easy finance options can attract investors to the real estate market. Investors and buyers buying real estate for personal use and for investment .
Higher Purchasing Power: Access to easy finance can enhance buyers' purchasing power by enabling them to afford properties that would otherwise be out of reach. This can expand the pool of potential buyers and increase the overall demand for real estate, particularly in segments where affordability is a key factor.
First-Time Homebuyers: Easy finance options can be particularly beneficial for first-time homebuyers who may have limited savings or access to upfront capital. By reducing the barriers to entry, easy finance can encourage more individuals to become homeowners, leading to an increased demand for residential properties.
Stimulating Investment: Easy finance options can incentivise individuals and investors to enter the real estate market. Lower interest rates and favourable financing terms can make real estate investment more attractive compared to other investment options. This increased investment activity can drive up demand for properties, both for personal use and for investment purposes.
5. FDI : Foreign Direct Investment (FDI) inflow in the Indian real estate sector has been an important source of capital and a catalyst for its growth. The Indian government has implemented several measures to attract FDI and encourage foreign investment in the real estate sector.
FDI has a several impact on Indian real estate and Indian economy .
Policy Reforms: The Indian government has introduced various policy reforms to liberalise the real estate sector and attract FDI. These reforms include easing FDI regulations, allowing 100% FDI through the automatic route in certain real estate segments, and introducing Real Estate Investment Trusts (REITs) to enhance investment opportunities.
Capital inflow: Direct FDI brings additional capital inflow to the real estate sector, The infusion of foreign capital allows for the execution of larger and more ambitious real estate projects.contributing to the growth and expansion of the sector.
Transfer of Knowledge and Technology: Foreign investors bring with them knowledge, expertise, and technological advancements in real estate development. This transfer of knowledge and technology can improve construction techniques, project management practices, and operational efficiency in the local real estate industry.
Market Development and Professionalisation: Direct FDI can contribute to the development and professionalisation of the real estate market. Foreign investors often introduce international standards, transparency, and governance practices, which can enhance the overall professionalization and competitiveness of the sector.
Indirect FDI: Indirect FDI that is FDI in other sectors also boosting Indian real estate growth,it can have several benefits for the Indian real estate sector. Here are some ways in which such investments can positively impact Indian real estate: Eg when Like of Samsung Invest in India how Indian real estate have benefits.
Industrial and Warehousing Demand: Samsung's investment in manufacturing units creates a demand for industrial and warehousing spaces. These manufacturing facilities require suitable land or industrial parks where they can establish their operations. This can lead to increased demand for industrial land, factory spaces, warehouses, and logistics center's, thereby boosting the real estate sector in those areas.
Ancillary Services and Retail: Samsung's presence in the manufacturing sector also stimulates the growth of ancillary services and retail outlets in the vicinity. Supporting industries, suppliers, and service providers tend to establish their businesses nearby to cater to Samsung's requirements and the needs of its employees. This can result in the development of commercial spaces, retail canters, restaurants, and other amenities, further enhancing the real estate ecosystem.
Economic Growth and Property Demand: Samsung's investment in manufacturing units contributes to overall economic growth in the region. This growth can result in increased income levels, consumer spending, and business activities. As a result, the demand for commercial real estate, including office spaces, retail spaces, and mixed-use developments, can also rise.
6. Growing Economy: The growing economy has a significant impact on the real estate sector. Here are some key impacts of a growing economy on real estate:
Increased Demand for Property: A growing economy typically leads to increased employment opportunities, higher disposable incomes, and improved consumer confidence. This translates into increased demand for residential properties, commercial spaces, and retail outlets. As people's purchasing power increases, they are more likely to invest in properties or expand their businesses, driving up the demand for real estate.
Rising Property Values and Prices: With a growing economy, property values and prices tend to appreciate over time. Increased demand, coupled with limited supply, can result in higher property values. Real estate investors and homeowners can benefit from capital appreciation, leading to potential wealth creation.
Expansion of Commercial Real Estate: A growing economy often prompts businesses to expand their operations or establish new ventures. This drives the demand for office spaces, industrial properties, and retail outlets. As companies require more space to accommodate their growth, the commercial real estate sector experiences increased demand and development.
Rental Market Growth: A growing economy can lead to an expanding rental market. As more people move to urban areas for employment and business opportunities, the demand for rental accommodations increases. This presents opportunities for real estate investors to generate rental income through residential and commercial properties.
Real Estate as an Investment Asset Class: A growing economy often encourages individuals and institutions to diversify their investment portfolios. Real estate, with its potential for capital appreciation and rental income, becomes an attractive investment option. The real estate sector benefits from increased investment inflows, both from individual investors and institutional players.
7. Government polices: Several recent policy developments have had a notable impact on the real estate sector.
Real Estate (Regulation and Development) Act, 2016 (RERA): The Real Estate (Regulation and Development) Act was enacted to bring transparency, accountability, and consumer protection to the real estate sector. RERA introduced regulations and guidelines for real estate developers, requiring them to register their projects and adhere to certain norms related to project timelines, disclosures, and quality standards. This policy has increased transparency and consumer confidence in the real estate market.
Foreign Direct Investment (FDI) Policy: The Indian government has made several amendments to the FDI policy in recent years to attract more foreign investment in the real estate sector. Changes such as easing restrictions on FDI in construction development projects and relaxing minimum project size requirements have been implemented to encourage foreign investors to participate in the Indian real estate market.
Insolvency and Bankruptcy Code (IBC): The Insolvency and Bankruptcy Code, introduced in 2016, has had an impact on the real estate sector as well. The code provides a framework for the resolution of insolvency cases, including those related to real estate companies. It has led to the initiation of insolvency proceedings against some real estate developers, resulting in changes in ownership, project delays, and project completion challenges.
Affordable Housing Policies and Pradhan Mantri Awas Yojana (PMAY): The Indian government has introduced several policies and initiatives to promote affordable housing, including the Pradhan Mantri Awas Yojana (PMAY). PMAY aims to provide affordable housing to eligible beneficiaries through various schemes and subsidies. These policies have led to increased focus on affordable housing projects, incentivizing developers to cater to this segment of the market.
Infrastructure Development and Smart Cities Mission: The government's focus on infrastructure development and the Smart Cities Mission has had an impact on real estate. Investments in infrastructure projects, such as the development of roads, metro rail networks, airports, and smart city initiatives, have opened up new opportunities for real estate development and influenced property values and demand in specific regions.
Land Acquisition Bill: had a significant impact on the real estate sector in India. The Act aimed to provide fair compensation to landowners and ensure transparency in land acquisition processes. It brings transparency and save cost of delay real estate projects .
REIT: REITs promise long term capital infusion into the real estate and have a significant impact on real estate development.
Increased Capital Availability: REITs provide a new avenue for real estate developers to raise capital. By pooling investments from individual and institutional investors, REITs accumulate substantial funds that can be deployed for real estate development projects. This increased capital availability can support the financing of new projects, expansions, and redevelopments.
Unlocking Value from Existing Properties & Enhanced Liquidity : Real estate developers can monetize their existing properties by creating REITs. By transferring their properties to a REIT structure, developers can unlock the value of their assets and generate funds for further development activities. This enables developers to recycle capital and focus on new projects, while the REIT manages the income-generating properties. and liquidity feature makes REITs an attractive investment option for investors, which in turn can attract more capital to the real estate sector.
Market Transparency and Benchmarking: REITs are subject to regulatory requirements regarding financial reporting and disclosures. The transparency and reporting standards set for REITs provide market participants with valuable information on the performance and valuation of real estate assets. This transparency promotes benchmarking and industry standards, leading to more informed investment decisions and increased market efficiency.
Government Backed Stress Fund: SWAMIH (Special Window for Affordable and Mid-Income Housing) is an initiative launched by the Government of India in 2019 to provide financial support to stalled affordable and mid-income housing projects.
It has raised Rs. 15,530 crore so far with an aim to provide priority debt financing for the completion of stressed, brownfield and Real Estate Regulatory Authority (RERA) registered residential projects that fall in the affordable, mid-income housing category.
SWAMIH has so far provided final approval to about 130 projects with sanctions worth over Rs 12,000 crore. In three years since inception in 2019, the Fund has already completed 20,557 homes and aims to complete over 81,000 homes in the next three years across 30 tier 1 and 2 cities.
Given the robust controls and despite the track record of the projects and promoters, the Fund has been able to complete construction in 26 projects and generate returns for its investors.
The Fund has also played a critical role in the growth of many ancillary industries in real estate and infrastructure sector having successfully unlocked liquidity of more than Rs. 35,000 crore.
8. Tourist : Rising Tourist numbers boosting the hospitality sector and increasing real estate demand.
Foreign Tourist Arrivals (FTAs) in June, 2022 were 522,737 with a positive growth rate of 1,349.2% as compared to 36,070 in June, 2021.
India’s tourism and hospitality industry is anticipated to touch US$ 418.9 billion by 2022.
During 2019, India earned US$ 30.0 billion in foreign exchange from tourism, recording a y-o-y growth of 4.80%. Foreign exchange earnings
(FEEs) from tourism in India grew at a CAGR of 8.96% during 2007-19.
The Medical Tourism Index for 2021 placed India in the 10th position owing to affordability, accessibility and quality medical facilities.
The growing inflow from tourists is expected to provide a fillip to the hospitality sector.
Hotel and Hospitality Sector: With rising tourist demand, there is an increased need for accommodation facilities such as hotels, resorts, and vacation rentals. This drives the development of new hotel projects and the expansion of existing ones. Real estate developers may invest in constructing or renovating properties to cater to the growing demand from tourists. This, in turn, stimulates the construction and real estate industries.
Development of Tourism-Focused Projects: In response to rising tourist demand, real estate developers may undertake tourism-focused projects. This can include the development of theme parks, entertainment complexes, shopping centres, and other attractions designed to cater to tourists. Such projects can transform an area's real estate landscape and create new investment opportunities.
Commercial Real Estate: Tourist demand can also drive growth in the commercial real estate sector. As tourist destinations become more popular, there is a higher demand for commercial spaces such as restaurants, cafes, shops, and entertainment venues. Real estate developers may focus on constructing or renovating commercial properties to cater to the needs of tourists and capitalize on the potential for increased business activity.
11. NRI investment : NRI investment in real estate have doubled. After covid the investment form Non -Resident Indian in the Indian property market has doubled and almost 20 per cent of the sales for many real estate developers are now coming from outside India.
As per report by Economic times a significant number of high net-worth individuals (HNIs), many of them NRIs, are planning to buy luxury real estate in India in the coming two years
the sector that are expected to grow to a whopping USD 14.9 billion in FY22.
