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March 27, 2024
Future Horizons: Indian Real Estate Sector’s Path to a $1.3 Trillion Market by 2034

The real estate sector in India is not just a behemoth in terms of market size but also a key driver of economic growth and prosperity. The sector is on a trajectory to reach unprecedented heights, with estimations projecting a market size of USD 1.3 trillion by 2034 and a staggering USD 5.17 trillion by 2047.

Current Market Landscape:

As of now, the Indian real estate market commands a market size of Rs 24 lakh crore, roughly translating to around USD 300 billion. This colossal figure is divided between residential and commercial segments, with a ratio of 80 percent and 20 percent, respectively. Such proportions underscore the substantial weightage of the residential sector in driving the overall market dynamics.

Within the real estate domain, the residential segment stands out as a powerhouse of growth and opportunity. Notably, 61 percent of the current supply in this segment surpasses the threshold of Rs 45 lakh, reflecting the evolving preferences and purchasing power of Indian homebuyers. Moreover, the average home area is witnessing an impressive annual growth rate of 11 percent, indicative of the burgeoning demand for larger, more spacious dwellings.

Projections and Growth Trajectory:

Recent projections shed light on the transformative role that Indian real estate is set to play in the country’s economic landscape. By the fiscal year 2034, the sector is expected to contribute a significant 13.8 percent to the projected GDP, with the market size reaching USD 1.3 trillion. Looking further ahead, by 2047, this contribution is anticipated to soar to 17.5 percent, with the market size skyrocketing to USD 5.17 trillion. These projections paint a vivid picture of the sector’s pivotal role in shaping India’s economic narrative.

Unveiling the Driving Forces:

Rising Demand and Aspirations: The heart of this unprecedented growth lies in the aspirations of over 28 crore Indian citizens yearning to own a home. With a burgeoning population, the demand for housing is reaching new heights, with surveys projecting an additional demand for 7 crore housing units by 2030. Notably, over 87.4% of this demand is anticipated to be for houses priced above Rs 45 lakh, reflecting the evolving aspirations of Indian homebuyers.

Urbanisation and Infrastructure Development: India’s urban landscape is undergoing a seismic transformation, fuelled by rapid urbanisation and infrastructural development. Satellite cities are emerging as veritable hubs for affordable housing, offering connectivity to major urban centres at a fraction of the cost. Upcoming projects like the Satellite Town Ring Road (STRR) and Peripheral Ring Road (PRR) in Bangalore are not only enhancing connectivity but also catalysing the demand for affordable homes in linked areas.

Financial Incentives and Easy Financing: The financial ecosystem is playing a pivotal role in propelling the real estate boom. With a significant increase in residential home loans and low non-performing asset (NPA) rates, financing for investors and homebuyers has become more accessible. Government initiatives like ‘Housing for All’ are further incentivising investment, with a projected $1.3 trillion infusion into the housing sector by 2025.

Shift in Household Dynamics: The evolving dynamics of Indian households, with a significant rise in nuclear families, are reshaping the demand for real estate. As more families seek affordable housing solutions, the market is witnessing a surge in demand for compact, budget-friendly homes. This demographic shift is fuelling innovation in the real estate sector, with developers catering to the evolving needs of modern Indian families.

Addressing Challenges and Seizing Opportunities:

Despite the promising trajectory, the real estate sector is not without its challenges. The existing urban housing shortage, estimated at around 10 million units, poses a formidable obstacle to sustainable growth. Additionally, regulatory hurdles and bureaucratic red tape often impede the pace of development.

However, amidst these challenges lie immense opportunities for innovation and collaboration. Real estate players are leveraging technology, such as PropTech platforms, to streamline processes and enhance transparency. Moreover, the synergy between government initiatives and private sector innovation is paving the way for inclusive growth and sustainable development.

Looking Ahead

In conclusion, India’s real estate sector stands at the cusp of a transformative journey, poised to reshape the economic landscape and uplift millions of lives. This development emphasises the profound significance of the real estate sector in bolstering India’s economy and driving key macroeconomic indicators. From employment generation to revenue generation for the government and banking ecosystem, the sector’s ripple effects permeate every facet of the economy. With rising demand, evolving aspirations, and concerted efforts from stakeholders, the sector is primed to realise its full potential and emerge as a cornerstone of India’s growth story.

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