💎 Real estate investing - Is this the right time?

A glimpse into India's real estate landscape

India's real estate sector is on an upward trajectory. Projected to reach a market size of US$ 1 trillion by 2030, it's set to contribute a significant 18-20% to the nation's GDP. This growth isn't just limited to the metropolises but spans across the country, reflecting a nationwide trend.

Key Highlights:

• The demand in the real estate sector, especially for data centers, is expected to surge by 2025. Additionally, the luxury residential market has seen a 151% YoY spike in early 2023.

• Indian firms are eyeing a massive raise of over INR 3.5 trillion (US$ 48 billion) through real estate trusts in 2022. Global investor Blackstone is also set to significantly boost its investments by 2030.

In essence, India's real estate sector mirrors the nation's economic progression and the aspirations of its population. With urban expansion and robust investments, the future looks promising for developers, investors, and homeowners alike.

Urbanisation fuels growth

The metropolitan cities of India, including Mumbai, Delhi-NCR, Bengaluru, Chennai, Kolkata, Hyderabad, Pune, and Ahmedabad, are the primary drivers of the real estate boom. These cities, with their burgeoning populations, thriving job markets, and increasing urbanisation, have become the preferred destinations for many looking for better opportunities and quality of life.

Here's a detailed look into the scenario:

Growth in commercial space

By the year 2023, the commercial space in India is projected to reach 50 million square feet (msf). This expansion is primarily driven by sectors such as IT-BPO, pharma, engineering, and manufacturing. These sectors have been the backbone of India's industrial growth and have significantly influenced the demand for commercial spaces.

Office space absorption rates

In 2022, the office absorption in the top 7 cities of India stood at an impressive 38.25 million square feet. This statistic underscores the growing demand for office spaces in major urban centers, which can be attributed to the expansion of businesses and the influx of multinational companies.

Hyderabad led in terms of new office space supply, holding a 31% share of the total 48.6 million sq ft of new completions. With 14.9 million sq ft of new office completions, the city surpassed Bengaluru, which had been the leader in the previous year.

Rise in housing prices

Housing prices across 8 major Indian cities increased by an average of 7% year-on-year during the second quarter of 2023. Despite the fall in change of housing prices, Mumbai still holds its name as the most expensive city to buy a property in India.

What is driving the demand for real estate in India?

Once considered the backbone of the nation's economy, India's real estate sector is experiencing an unprecedented resurgence. This revival is a result of a confluence of several factors that have been at play, especially in recent years. Let's delve into the key drivers propelling the demand for real estate in India.

1. Urbanisation and population growth: India is undergoing a significant urban shift. The country's urban population is projected to reach a staggering 542.7 million by 2025. This rapid urbanisation, coupled with the overall population growth and rising household income, is creating a substantial demand for both residential and commercial properties.

   

   
   

2. Government initiatives: The Government of India has been proactive in promoting the real estate sector. The 'Housing for All by 2022' initiative aimed to address the housing needs of the urban poor. Additionally, the Pradhan Mantri Awas Yojana (PMAY) provides credit-linked subsidies to middle and lower-income groups, making home ownership more accessible.

3. Robust infrastructure development: Infrastructure development is a significant catalyst for real estate growth. The Government's focus on improving road connectivity, metro rail networks, and airport expansions in various cities has positively impacted the real estate sector, making certain areas more accessible and attractive for development.

4. Foreign Direct Investment (FDI): The construction sector, including real estate, has attracted substantial FDI inflows. From April 2000 to December 2022, the sector received FDI worth US$ 55.50 billion. This foreign investment is not only bringing in capital but also international best practices, enhancing the overall quality of real estate projects in the country.

5. Flexible workspaces: The rise of co-working spaces and the increasing acceptance of remote work have changed the dynamics of commercial real estate. There's a growing demand for flexible workspaces, especially in metro cities, catering to startups, freelancers, and even established companies.

In essence, the real estate sector in India is on an upward trajectory, fueled by a combination of demographic, economic, and policy-driven factors.

Is it wise to invest in real estate now?

As we navigate the intricate tapestry of India's real estate landscape, a pressing question emerges for potential investors: Is this the right time to invest in real estate?

Here are a few considerations to take into account before you make a decision to invest in real estate:

• Market dynamics: Understanding the current market trends, including property prices, demand-supply dynamics, and future projections, is paramount. While some cities might be experiencing a boom, others might witness a lull.

• Interest rates: The prevailing home loan interest rates can significantly impact your investment decision. Lower rates can make property purchases more affordable, but it's essential to factor in future rate fluctuations.

• Purpose of investment: Are you looking for a property to live in, or is it purely for investment purposes? The answer can influence the type of property you should consider and the locations that would offer the best returns.

• Long-term horizon: Real estate investments typically require a longer commitment than other assets.

• Regulatory environment: Stay updated with the latest government regulations, tax implications, and property laws. These can influence property prices and the ease of transactions.

Real estate, as an investment, offers both tangible and intangible benefits. The pride of ownership, potential for property appreciation, and tax incentives are compelling reasons to buy. However, the flexibility, lower upfront costs, and short-term commitment make renting attractive for many.

In essence, investing in real estate now depends on individual financial situations and long-term goals. While the allure of owning property is undeniable, it's crucial to assess your financial and mental readiness before taking the plunge.