Indian Realty Expected to Grow by 30% in Next Decade, Will Remain a Good Investment

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posted on 7 years ago — updated on 1 second ago

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Globally, real estate is recognized as a sector which has the most economic linkages. In India, realty is the second largest employer after agriculture and is slated to grow at 30% over the next decade as the number of Indians living in urban areas is set to increase from 434 million in 2015 to 600 million by 2031, according to the India Brand Equity foundation.

The real estate sector comprises housing, retail, hospitality, and commercial sub sectors. Demand for office space and urban and semi-urban accommodation will drive the growth in this sector. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

It is also expected that this sector will incur more non-resident Indian (NRI) investments in both the short term and the long term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

The Indian real estate market is expected to touch $180 billion by 2020. The sector is expected to grow at a compound annual growth rate (CAGR) of 11.2% between 2008 and 2020. Retail, hospitality and commercial real estate will provide the bulk of the growth.

Private Equity investments by domestic and international investors in Indian realty declined 30 per cent to $2.5 billion across 48 deals during the January-September 2016 period.

Over April-June 2016, India's office space absorption grew 46 per cent year-on-year to over 10.2 million square feet, primarily led by Delhi National Capital Region (NCR) and Bengaluru, which accounted for almost 50 per cent of the total space take-up. On the supply front, over 7 million square feet of fresh office space was added in April-June 2016, led by Hyderabad and Mumbai.

Mumbai is the best city in India for commercial real estate investment, with returns of 12-19 per cent likely in the next five years, followed by Bengaluru and Delhi-National Capital Region (NCR). Sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand for office space in recent times.