The Indian real estate sector has shown significant growth in recent years. While 2023 was the year with the highest number of new project announcements in the last decade, the first quarter of 2024 surpassed almost all records of the previous year. In 2024, the residential real estate market is expecting a strong influx of new launches, with an estimated range of 280,000-290,000 units, as per a report. This has set a good path for 2024, which shows that the sector is not only rising but also promising further growth in the coming years.
What Will Drive the Market in 2024?
India’s real estate market has traditionally been one of the key drivers of economic growth, contributing significantly to the country’s GDP. Despite facing headwinds in recent years, like liquidity crunch, regulatory reforms, and the COVID-19 pandemic, the sector has shown resilience and adaptability. In 2023, the market witnessed a gradual recovery, fueled by pent-up demand, favourable government policies, and increased digital adoption across the industry. As per the erstwhile Housing and Urban Affairs Minister Hardeep Singh Puri, the real estate market in India is expected to contribute about 15% to India’s GDP by 2025 and reach a $1 trillion market by 2030.
The Indian real estate market is not limited to cater to the local demand, but also seen as a global investment opportunity. NRIs, in particular, are actively participating in the market, not just as investors, but as a way to stay connected with their motherland. As of the fiscal year 2019-2020, NRIs accounted for about 10% of the total investments in the market. This figure has now grown to about 15% and is projected to be at 20% by the end of the year 2025. This is a clear indication of the market’s global appeal and the trust it has garnered from the NRI community.
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The upward trend in the Indian real estate sector is not a result of random factors but a testament to its resilience. Despite the sustained depreciation of Indian rupee and the challenges posed by global economic conditions, the sector has maintained a steady increase in rental yield. This, coupled with favourable economic policies and an emotional connection with the home country, has fuelled the sector’s growth, instilling confidence in its stability and potential for further growth.
Market Dynamics and Buyer Trends
Upscale Lifestyle Trend
With the growth of the economy, people of India with higher disposable income want to lead a luxurious life. The population also seeks houses with additional facilities like fitness clubs, swimming pools, and beautiful gardens. Not only the HNIs and UHNIs but also the upper-middle-class people are going for a bigger space in their living and spending more on it.
Environmental Considerations
In the last two years, the Indian real estate market has experienced a major change in the construction of sustainable buildings. With energy conservation in building designs, environment-friendly construction materials, and water conservation and management, the real estate sector is reinventing living standards. Consumers are in search of homes that reflect their beliefs and principles. Modern-day homebuyers, particularly Generation Y, look for homes that have renewable energy systems, rainwater harvesting systems, and energy-efficient appliances.
Sustainable residences also allow natural lighting and air, which gives the feeling of more space and fresh air. This helps reduce stress levels and increases moods, thus increasing productivity, especially for those who work from home. While there is a slightly higher cost of constructing green real estate than ordinary homes, people can save a lot of money on their bills in the long run, thus making it a wise investment.
Housing Preferences
A shortage of Ready-to-Move-In (RTMI) inventory, coupled with price hikes in gated communities, is pushing buyers towards under-construction projects, resale properties, and individual homes. Resale properties are in demand as they offer a decent living space without the wait or the high cost of interiors. Under-construction houses are preferred because their prices are anticipated to increase significantly upon project completion.
Investment Shifts
Traditionally, commercial properties have been preferred for investment due to their superior returns and minimal maintenance demands. However, a notable upswing in the rental yield of residential properties over the last two years, along with their cost-effectiveness, has tipped the scales in their favour. Given the rapid escalation in prices, there is a prevailing anticipation that residential properties will outperform their commercial counterparts in terms of capital appreciation.
Government Initiatives and Policy Rates
India’s promise of affordable housing remains solid with effective government initiatives and programs. These steps help the sector a lot, as over 50% of Indian household savings are invested in real estate. The Reserve Bank of India (RBI) continues to maintain a policy rate status quo, thus fueling high growth in the housing sector. The further continuation of this stability is expected to increase the demand for housing even more.
The Use of Technology
Technology is rapidly transforming the real estate market, making it more accessible and efficient for people to access and invest in properties. Market information is now available at the fingertips; property viewing through virtual tours and buying/selling a house at the click of a button is changing the face of house hunting. Through the use of metro-based filters on proptech platforms, people are able to search for homes outside their office proximity, thus accessing affordable homes while at the same time reducing time spent on their daily commutes. Internet channels are gradually becoming a one-stop shop for all the services associated with the real estate market, enhancing the convenience and efficiency of the process.
Buyers today are looking for more than just a house; they desire a home that seamlessly integrates technology to enhance their lifestyle. From automated lighting and climate control to voice-activated assistants and smart security systems, elevators with predictive maintenance service, the demand for smart homes is reshaping the real estate landscape. Smart home technology has become a key differentiator for properties on the market, influencing buyer preferences and purchase decisions.
In conclusion, there is a pronounced resurgence in construction activity post-COVID, channelling renewed momentum into the real estate market. With the middle-income segment of people aspiring for an upscale lifestyle, home prices will continue to grow in India for a stable future. As projects witness an uptick and new launches approach completion, the market is poised for a recalibration and stability in property prices. The confluence of market dynamics, government initiatives, and evolving homebuyer preferences sets the stage for a thriving real estate landscape in 2024, making it not just promising but also a year full of potential for homeownership.
(By Amit Gossain, Managing Director, KONE Elevator India)
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