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Building the Future: How India's real estate sector is paving the path to a $1 trillion market

Building the Future: How India's real estate sector is paving the path to a $1 trillion market

by Rakesh Reddy, Managing Director, Aparna Constructions

The real estate sector is widely regarded as a bellwether of India’s overall economic performance. The market is currently valued at approximately $300 billion, with residential and commercial segments comprising 80 percent and 20 percent of the total market size, respectively. With the sector positioned advantageously in the coming years, forecasts indicate a significant growth trajectory, with a projected CAGR of over 18 percent from 2020 to 2030. This anticipated growth is expected to elevate the market size to $1 trillion by 2030 and a staggering $1.5 trillion by 2034. Key factors contributing to economic growth include favourable conditions such as a burgeoning young population, strengthened domestic manufacturing, advancements in infrastructure, and the expansion of urban areas.

The residential segment is poised to lead the way, projecting a value of $900 billion by the year 2034. This growth is attributed to the increasing urban population, which is expected to reach $1.55 billion by the same year. Accordingly, an estimated 78 million new housing units will be needed in cities to meet the demands of this expanding population.The increased demand highlights the critical necessity for innovative solutions and strategic planning to tackle the housing deficit and promote sustainable urban growth.

It is anticipated that the overall commercial real estate industry will experience significant growth in the forthcoming years, driven by substantial long-term investments from institutional investors, particularly in Grade A office spaces, warehouses, and data centers. The office segment continues to be a promising area of growth, with a forecasted value of $125 billion expected to be reached by 2034. This projected growth is attributed to the expansion of businesses and the growing significance of the IT and service industries within the Indian economy..

Within the next year, the ecommerce sector alone is anticipated to require at least 25 million square feet of Grade A warehousing and logistics facilities. Additionally, with the rollout of the 5G network, there will be a surge in demand for data centres in India, leading to a sharp need for specialized commercial real estate.

Government-led programs are heavily contributing to the growth of the real estate industry. Through the implementation of affordable housing initiatives and investor-friendly policies, a conducive environment is being established for both buyers and developers. Flagship initiatives such as the Smart Cities Mission and Make in India are further bolstering the demand for commercial and industrial real estate.

Investments in capital expenditure for infrastructure projects and asset development have served as key drivers in stimulating growth factors across the real estate landscape.The continued expansion of the real estate sector can be attributed to a substantial investment towards infrastructure enhancements, with a specific focus on the enhancement of transportation networks such as roads and metro-railways. Accordingly, India has positioned itself as a preferred, resilient, and economically attractive hub for investors and businesses seeking to maximize returns on investments.

The evolving demographics and increasing prosperity in India are mirrored in the growing aspirations of Indian homebuyers. By 2034, the number of HNI and ultra-HNI households is projected to triple, reflecting this aspirational growth. This demographic transformation not only drives the demand for luxury housing but also creates a profitable market for developers who seek to meet the desires of India's growing affluent demographic.

The traditional dominance of Tier 1 cities in driving India's economic growth is being challenged with a significant paradigm shift on the horizon. Tier 2 cities are now positioned as the emerging powerhouses of growth, poised to surpass their Tier 1 counterparts. This transformative trend not only signifies a decentralization of economic activities, but also signals a wealth of opportunities for investors and developers to capitalize on the potential of rapidly expanding urban hubs.

In order to preserve our strong momentum towards a $1 trillion real estatemarket, it is important to acknowledgeand address the challenges that remain. Streamlining regulatory processes, fostering transparency, and resolving infrastructure bottlenecks are essential for maintaining the current progress. Furthermore, promoting inclusive growth that provides opportunities for allstakeholders, including developers, investors, buyers, and renters, is critical for establishing a robust and equitable real estate landscape in India.

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