by Arvind Nandan, Managing Director – Research & Consulting, Savills India
India's real estate sector demonstrated resilience in 2024, fueling optimism for 2025. Office leasing hit record highs, while luxury property values surged in key residential markets. The industrial and logistics sectors flourished, and the data center industry experienced rapid growth. With proactive policies and evolving market dynamics, the sector is poised for significant expansion
The Indian real estate market in 2024 has demonstrated remarkable resilience and innate strength, laying the groundwork for what promises to be an even more robust 2025. This year has been pivotal in shaping various sectors including industrial, warehousing, office and residential, with trends indicating ever rising demand from businesses and homeowners alike.
In the office sector, leasing activity is poised to reach hitherto unknown levels, surpassing the records of the last two years. The technology-driven segment remains the dominant demand-driver, as Bengaluru continues to lead the market. Flexible workspace operators have been instrumental in meeting the changing demands of businesses, with their expansions poised to boost leasing activity further in the coming year. Notably, core office markets have seen a sharp rise in rentals, partly owing to limited supply but also on the back of high demand. While supply infusion was somewhat constrained in 2024, a significant influx of space is anticipated in 2025, fueling even further growth.
The residential sector has also witnessed remarkable developments, particularly in the luxury segment. In bigger cities such as Delhi-NCR, Mumbai, Bengaluru and North Goa, the capital values of luxury properties have appreciated by up to 55-60% on an annual basis, driven by sustained demand. Bengaluru’s rental market has seen notable growth, with areas like Whitefield, Indiranagar, and Sarjapur Road experiencing significant rental hikes. This can be attributed in some part to the return-to-office policies adopted by IT companies. Similarly, Gurugram and Bengaluru recorded a substantial increase in the launch of new luxury units, in an evident anticipation of robust appetite for premium housing.
Mumbai has seen a growing preference for larger homes, such as bungalows and prime residences, particularly among professionals in financial services and legal sectors, which are increasingly adopting hybrid work models. Meanwhile, North Goa has continued to emerge as a hotspot for second homes, with capital values of villas witnessing a year-on-year increase of 16%.
The industrial and logistics sector demonstrated remarkable growth, reaching historic new heights in both demand and supply witnessed in 2024. The absorption is led by sustained demand from the 3PL and manufacturing segments as well as a surge from FMCG, FMCD and E-Commerce. Over the last 3-4 years, demand for compliant and Grade-A space has been increasing due to changing occupier preferences to meet ESG standards. Rental values have begun to get better for compliant buildings across cities. Looking ahead, significant expansion is anticipated for industrial and logistics sector, bolstered by a favorable demand environment, proactive government initiatives and emerging l hubs for sourcing, consumption, and distribution, especially in Tier-II & III locations.
India's data centre industry is on the rise too, driven by digital transformation and a growing need for digital infrastructure. With enterprises and consumers adopting AI, IoT, and 5G technologies, this momentum positions India as a promising global data centre hub. The total data centre capacity in India is expected to grow at a CAGR of 23% from 2024 to reach 3,250 MW capacity by 2030. Tier-II and III cities such as Bhubaneshwar, Patna, Lucknow, Jaipur, Kochi, Vizag, Coimbatore, Madurai and Hubli are expected to witness higheractivity with growing demand for edge data centres, while dominant Tier-I cities like Mumbai, Chennai, Bengaluru, Hyderabad, Delhi-NCR, Ahmedabad and Kolkata continue to grow.
As we enter the second half of a very eventful third decade of this century, the outlook for Indian real estate seems much more optimistic than observed in the last several years. To put things in perspective, unlike this time, there had been no big expectation at the start of any year since the global pandemic cast its shadow four years ago. Even after COVID, ie, 2022 onwards, there has remained a lingering uncertainty on account of geo-political events and elections across the globe. While several of those uncertainties persist, it is becoming increasingly clear that emerging markets like India have got strong foothold and a significant role to play. This bodes well for the country’s economy in general, and of course, for real estate. Most asset classes are positioned well to build on the momentum of 2024. The coming year holds immense promise, and all the constituents will be keen on playing an integral role in shaping the future of Indian real estate.