The Future Prospects of Real Estate Investment in India
The Indian real estate landscape is witnessing a significant transformation, particularly in the luxury segment. Post-pandemic, the market for high-end properties has shown remarkable growth, indicating a promising future for real estate investments.
Luxury Real Estate on the Rise
According to a recent report, approximately 18% of the nearly 400,000 units sold in the top seven cities in 2022 were luxury properties, marking a significant increase from pre-COVID times when only 7% of the 275,000 units were classified as luxury.
The high-ticket luxury segment in India encompasses properties priced at Rs 1.50 crore and above, with the Mumbai Metropolitan Region (MMR) and the Delhi-NCR regions seeing higher demand for these properties. In MMR, the luxury category starts at Rs 2.50-3 crore.
Sales Surge and Price Increase
Hyderabad has recorded the most substantial surge in the average price of luxury homes, rising from about Rs 7500 per sq. ft. in 2018 to around Rs 11000 per sq. ft. in the first half of the current year. Bangalore and Mumbai follow closely, with a 27% average price increase in the luxury housing market.
The top seven Indian cities, including Delhi-NCR, MMR, Hyderabad, Pune, and Bangalore, are experiencing the highest demand for high-end units, with MMR and NCR accounting for over 50% of overall sales. A noteworthy 47% of buyers originate from Tier 2 and Tier 3 cities, indicating a shift towards more accessible real estate options.
Growth Across Sectors
Growth in the Residential Sector
The residential segment of real estate has seen substantial growth, with 68% year-over-year sales growth in 2022. This trend is driven by the popularity of Tier 2 and Tier 3 cities, where affordable housing has become a significant focus. Increased awareness of home ownership and government schemes are fueling this movement.
Growth in the Commercial Sector
The commercial sector is also witnessing rapid growth, particularly in Tier 1 and Tier 2 cities like Pune and Hyderabad. Co-working spaces have emerged as a preferred model for workspace solutions, catering to the needs of the growing young population in India. This trend is expected to continue, driving the demand for commercial spaces and offices.
Growth in the Retail Sector
The retail sector is projected to witness better growth in supply in the future, with new retail spaces being added across India. This is being spurred on by the anticipated increase in consumer spending and urbanization. Retailers are actively looking to expand their presence in emerging markets, making the sector more attractive for investments.
Boost in Affordable Housing
The government's initiative, PM Awaas Yojana, has seen a fund increase of 66%, reaching approximately Rs 79,000 crores. This significant boost is likely to benefit the affordable housing market, which has traditionally faced challenges due to rising input costs and the pandemic. The government's efforts aim to make housing more accessible to the middle and lower-income groups.
Overall, the future of real estate in India looks promising, with potential for better returns and positive outcomes for investors. The market is undergoing a transformation, driven by economic growth, urbanization, and government support, making it an attractive investment opportunity in the long term.