Explosive Growth Predicted for India’s Real Estate Sector

The real estate sector in India is on a trajectory of remarkable expansion, with projections indicating that it will soar to an astonishing $5.8 trillion (or $5,833 billion) by the year 2047. These findings come from a comprehensive report jointly published by leading real estate consultancy, Knight Frank India, and the National Real Estate Development Council (NAREDCO), a prominent industry body.

Substantial Contribution to Economic Output

According to this report, the value of real estate output is anticipated to constitute a substantial 15.5% of the total economic output in India by 2047. This represents a significant leap from the current share of 7.3%. This growth is anticipated to play a pivotal role as India celebrates its 100th year of independence in 2047.

Housing Requirement and Market Potential

The report outlines that in the upcoming 25 years, the nation will witness a cumulative demand for approximately 230 million housing units. In terms of market value, the residential real estate market has the potential to generate an impressive output equivalent to $3.5 trillion by 2047. This surge is driven by evolving income profiles and the consequent demand for housing across various price categories.

Shifts in Housing Demand

The dynamics of housing demand are expected to undergo substantial changes. Although the demand for affordable housing will persist in the coming years, there will be a gradual shift towards mid-segment and luxury housing options. The percentage of lower-income households, currently comprising 43% of the demographic, is projected to decrease to a mere 9% by 2047. As a result, a significant portion of the population will transition to the lower-middle and upper-middle-income brackets, fostering substantial demand for mid-segment housing.

Rise of High-Income Households

The report also anticipates a noteworthy increase in the share of High-Net-Worth Individuals (HNIs) and Ultra-High-Net-Worth Individuals (UHNIs) households. This category is expected to grow from its existing 3% to 9% by 2047. This rise will significantly drive the demand for luxury housing in India.

Niranjan Hiranandani, the National Vice-Chairman of NAREDCO, emphasized that the ambitious ‘Housing for All’ initiative by the Prime Minister’s Office will serve as a catalyst for sustained demand across the residential spectrum. The Indian government and regulatory authorities are actively laying the groundwork for the upward cyclical growth of the real estate sector. The sector’s growth is further propelled by a favorable domestic economic climate, robust infrastructure expansion plans, diverse investment models, and robust domestic consumption.

Hiranandani added that the escalating GDP will not only stimulate the growth of commercial and industrial real estate but also attract global investors towards Grade-A assets. Moreover, emerging alternative asset classes are set to play a critical role in aggregating investments and bolstering investor confidence.

Private Equity Investments and Future Projections

Over the past two decades, private equity (PE) investments in India’s real estate sector have exhibited consistent growth. The report forecasts that by the end of 2023, PE investments in Indian real estate will reach an impressive USD 5.6 billion, showcasing a year-on-year growth of 5.3%. Looking ahead, with India’s GDP projected to touch $36.4 trillion by 2047, private equity investments within the real estate sector are anticipated to surge to a staggering $54.3 billion by 2047. This signifies a compelling Compound Annual Growth Rate (CAGR) of 9.5% spanning the period from 2023 to 2047.

This growth trajectory points to a dynamic and robust real estate landscape in India, as both domestic and international investors recognize the immense potential of this sector.

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