September 23, 2024: The interplay between real estate and India’s economic growth journey over the next few decades is explored in the latest report “Indian Real estate: The Quantum Leap” by Colliers in collaboration with the Confederation of Real Estate Developers’ Associations of India (Credai) and released at the CREDAI NATCON event in Sydney. India continues to be the fastest growing economy driven by strong domestic demand, improving business environment and supportive as well as forward-looking developmental policy initiatives.
As India heads towards its centenary year of independence, real estate will play a pivotal role in the economic growth trajectory of the country. This long-term growth in real estate is underpinned by six salient growth levers which includes, rapid urbanisation, infrastructure development, digitalisation, demographic shifts, sustainability and investment diversification; all of which will form the bedrock for a quantum leap in Indian real estate by 2047. These long-term growth ingredients will be pivotal in the expansion of Indian real estate – from under a trillion currently, to potentially a $10 trillion market by 2047, accounting for a 14-20% share in the country’s GDP.
Along the accelerated journey till 2047, various real estate segments will evolve and continue to proliferate, growing and maturing by varying degrees. Core assets such as office and residential real estate are likely to mature further and alternative assets such as data centres and senior living will embark upon strong growth trajectories. Market consolidation, fair-pricing and institutionalisation will become more pervasive across asset classes, especially in the industrial and warehousing segment.
Shifting demographics and rising urbanisation to spur long-term real estate demand
With shifting demographic patterns in India, the median age is likely to increase from approximately 30 years to around 40 years by 2050. Further, half of the Indian population is projected to live in urban agglomerations by 2050. With rapid urbanisation and supporting factors like infrastructure growth and employment opportunities, real estate traction is likely to expand beyond the Tier-I cities and create dispersed growth centres in smaller towns and cities. Peripheral areas of established cities and Tier-II and III cities of the country will particularly witness accelerated real estate development across asset classes.
Shifting demographics will drive real estate activity, especially in housing and retail asset classes. With a significant portion of the Indian population likely to fall in the sweet spot of ‘first-time homebuyer’ age-bracket, healthy traction across housing categories is expected in the next few decades. Additionally, a population with a significant share of older people can potentially speed up investments in the senior living market.
“With the interplay of dynamic factors such as rapid urbanisation, rising median age and technological advancements, we are on the brink of a quantum leap, entering a new era of growth and diversification. By 2047, an estimated 50% of India’s population will reside in urban centres, creating unprecedented demand across residential, office and retail spaces. Alternative segments like senior living, co-living and data centres will also witness exponential growth, driven by evolving consumer preferences and technological integration, with a focus on sustainability and energy efficiency becoming a standard across developments. As India navigates this exciting trajectory, the real estate sector will continue to attract institutional investments, fostering transparency, fair pricing and global competitiveness. Being a leading industry body, Credai looks forward to working with various stakeholders to ensure that Indian real estate witnesses sustained and sustainable growth in the decades to come,” said Boman Irani, President, Credai National.
“India has set its sight on becoming a $10 trillion real estate market, driven by the sector’s ability to adapt and innovate. Landmark initiatives such as RERA and REIT regulations have enhanced transparency, improved investor confidence, and streamlined operations across the sector. These reforms, alongside critical programs like PMAY and Gati Shakti, are creating a conducive environment for sustained real estate development. The government’s focus on affordable housing, infrastructure modernisation, and industrial corridors have transformed both urban and rural landscapes, driving growth beyond traditional hubs. This transformation is creating vibrant opportunities for developers, investors, and homebuyers alike. As we move forward, real estate will continue to be a catalyst for employment generation, economic resilience, and sustainable urbanisation, reinforcing its role as a key pillar in India’s economic growth story,” said Manoj Gaur, chairman, Credai National.
“As India commences on a period of expansion across most economic sectors, real estate is set for a ‘Quantum Leap’, with multiple growth opportunities arising along the accelerated journey phase. Favourable demographics and urbanisation trends are likely to accentuate the emergence of over hundred – million plus cities by 2047. This in turn presents a case for emergence of multiple real estate hotspots dispersed across the country. Residential, office and retail segments, particularly, are expected to mature significantly in the next few decades, creating substantial opportunities for investors, developers and occupiers,” said Badal Yagnik, chief executive officer, Colliers India.
Infra enhancement and supportive regulatory framework imperative for fostering long-term real estate growth
Infrastructure augmentation and policy-level push have enabled the Indian real estate to sail through multiple ebbs and flows of property cycles. Throughout the last few decades, key regulatory frameworks and acts such as the RERA Act, PMAY and REIT regulations have provided a boost to investor and end-user participation. Policies and regulations for logistics and data centres have been instrumental in the accelerated growth of newer real estate frontiers. Furthermore, flagship programmes such as the Golden Quadrilateral Project, PM Gati Shakti Master Plan, ‘Make in India’ Programme and National Infrastructure Pipeline have positively impacted multiple real estate segments across the country, particularly the industrial and warehousing segment. With high-volume freight movement along industrial corridors, amplified requirements for warehouses, logistics hubs, and manufacturing units can be anticipated across multiple smaller locations in the country. Over the next few years, asset classes under REITs/SM REITs will expand beyond office and retail to include warehouses, hotels, and rent-yielding residential properties. In the long-term, such financing avenues will become prevalent in alternate real estate verticals such as data centres, hospitals, educational institutes, senior and student living accommodations.
Alternate investments likely to become mainstream
Over the years, driven by strong domestic growth prospects, improvements in ease of doing business and continual FDI relaxations, foreign capital inflow has grown significantly across diverse sectors. Institutional investments in the real estate sector in the last decade have crossed $60 billion, with the majority being funded by foreign players. The anticipated spurt in foreign capital and equally strong contribution from domestic investors will fast-track the adoption of alternate funding strategies in Indian real estate. Green financing in the form of bonds and credit issuances and relatively newer financing avenues such as social-impact, distressed, special situation and venture capital funds will become more prevalent in the next few years.
Digitalisation and sustainability will be the central themes in the future of real estate
Over the next few years, the Indian real estate sector will increasingly embrace digitalisation across aspects ranging from planning, design and construction to property and facilities management. PropTech and Metaverse are likely to mature and elevate Indian real estate to global standards of operational efficiency, transparency and accountability. Increased data consumption, growing internet penetration, rise of online services, digitalization of businesses, and stricter adherence to data localisation regulations are expected to spur demand for co-location and edge data centres closer to demand hubs. Advanced technologies will also play a major role in decarbonizing the real estate sector. With focus on built spaces, developers will incorporate sustainable elements at every stage of construction. Green-certifications in the office market will particularly become a hygiene-factor and green-adoption levels are likely to increase from about 60-70% to almost 100% over the next few years.
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