Real Estate – Trends & Opportunities !

From time immemorial the first need of mankind has been food, clothes & house (roti , kapda & makaan) in that order . Over generations as humanity evolved mother earth got divided into kingdoms, continents, countries and so on, but one desire that every individual aspires is shelter. With the human population increasing at a brisk pace the burden on earth is only going to increase further .
As data and trends suggest India would one of the leading destination for real estate globally.
With a migration of 10 million annually from rural to Urban areas coupled with a shortage of 19 million,housing, gives a clear indication about the potential in the coming decades. The real estate consists of sectors namely housing, retails , hospitality , entertainment and infrastructure.
The Indian Real Estate industry is one of the fastest globally recognised sectors. The growth of the industry is directly linked to the growth of the economy.

  • Key Indicators about India
    • Land Area: 3.3million square km
    • Population: 1210 million and growing (2011)
    • Urban concentration: 380 million(2011)
    • Average house hold size: 4.8(2011)
    • GDP: USD 1.8 trillion (2012) to USD 6.6 trillion(2028)
    • Per capita of Urban India :USD 2800(2012) to USD 8300(2028).
  • Key Indicators about the Real Estate Industry:
    • GDP contribution: 6.3% in 2013 to grow to 13% by 2028
    • Second largest employer after agriculture.
    • Market size : 121 Billion USD(2013) to 853Billion USD(2028) an increase of 7 times .
    • FDI in Real Estate : 23874 million USD ( 2000 – 2014)
    • Infrastructure Spending by Government of India: USD 1000Billion – 12th Plan (2012-2017)

The spectacular success of the real estate industry has been backed by strong economic growth in the last decade coupled with business friendly reforms, young population, rising income and burgeoning middle class.
Infrastructure initiative by the Government:

  • Road projects : Golden Quadrangle , Highways and Expressways
  • Metro Rail: After the success of Delhi & Kolkata Metro all major cities like Bengaluru, Chennai , Mumbai, Hyderabad, Ahmadabad, Jaipur would soon have have their own metro’s.
  • Modern Airports: Modernisation and expansion of airports in Delhi, Mumbai,Bengaluru,Chennai,Hydrebad has bought India amongst the best in the world.
  • Commercial : Retail Malls , IT , Manufacturing & BFSI has further added to the growth of the sector .
  • Cities : Cities with population of 1million has increased from 35 to 53 , with 8cities having a population of more than 5million. Almost 90million have moved to urban areas resulting newer cities , thereby resulting in 50million new houses in the last decade.

Catalyst in the time to come:
  • Rapid Urbanisation: About 10million people are migrating to cities every year ,by 2025 the Urban population would contribute almost 75% of the GDP. Nearly 2 Million/pa , houses would be required in the affordable segment.
  • Nuclear Families : 35% of the population is in between 15-35 years of age bracket , thereby driving growth in the next couple of decades . To add to this the size of the family would reduce from 4.8 to 4.4 , adding another opportunity of growth.
  • Increase in per capita: USD2800(2012) to USD8300(2028), will lead to further growth.
  • Land reform Bill : Land Acquisition Resettlement & Rehabilitation Act 2013 would help in streamlining the land acquiring process.
  • Regulator: Real Estate Regulatory Authority will help in stream ling the other wise disorganised sector. It would act as watch dog for consumer protection rights.
  • GDP : In the years to come India is expected to one of the fastest growing economy In the world . A stable government at the centre , rapid pace of reforms , faster decision and implementation would also help the real estate sector.
    • Residential : This accounts for almost 80% of the total real estate market , which could be categorised into three namely :
      • Affordable housing: It caters to economically weaker sections and lower income groups , this segments accounts for 85%+ of the total demand , where the average size would be 400sft and the price range would be from 5 to 10 lakhs, by 2028 the expected demand would be 40million plus units.
      • Mid Income Housing: With changing demographics, this segment would jump form the current 32million to 114 million household by 2026. A typical unit size would average around 1000sft and the average price would be from 10 lakhs to 1cr , by 2028 the expected demand would be 3.5million plus units. This would account for 7% over all demand by 2028.
      • Luxury housing: Ultra branded townships with world class amenities are the latest trends , it is one of the fasted growing segment, typicall price points would be 1cr upwards. The demand is expected to triple in the time to come, 1.5 million units would be required by 2028. Big players are collaborating with international brands to offer the best. As per the list of billionaires, India ranks 6th globally, this segment is to watch out for.
    • Commercial: This segment is linked to the economic growth of the of the country , broadly categorised into:
      • Retail: This segment currently generates revenue worth USD 520 billion by 2020 it is expected to touch about USD950billion. With the segment moving towards organised retail and global multinational setting up operation in various segments , the demand for space would be very high.
      • Office :In the time come India’s position would further strengthened in the IT/ITeS space . As per NASSCOM estimates this sector would generate revenues worth USD300billion by 2020 from the current USD118billion, employing 5million plus from the current 2.4 million. BFSI segment is also expected to contribute to the demand , with new banking licence in place there would be further demand for office space.
    • Challenges: Apart from being a highly disorganised sector there are other issues which plague the sector few of them being skilled manpower , latest technology, land acquiring procedures, inadequate capital , prolonged and strict approval procedures.
    • Opportunities: With the GDP is expected to rebound the in coming years the real estate sector will be one of the immediate beneficiaries and that would have a rippling effect on the related segments , like engineering, project and design consultants, material suppliers, architects and property management experts, not to forget the most important component i.e. the investor community.

With demand and demography in place the real estate sector would be one of the key beneficiaries in the years to come. India continues to be one of the top countries for real estate investments globally and especially in the Asia Pacific region. A recent KPMG report has four India cities (Delhi,Mumbai,Bengaluru & Chennai) among the top 25 in APAC region as the most preferred destination for real estate investments .

Disclaimer: This data above does not purport to be advice nor a complete guide on products or investing. An Investor must consult a licensed professional, on any of his investment decisions before investing.

Sources: , International Monetary Fund , The World Bank , CREDAI.
The Planning Commission, ToI, Economic Times, PwC, NASSCOM.