In recent years, India’s real estate sector has demonstrated remarkable resilience, poised for a compounded annual growth rate (CAGR) of 18.7 per cent from 2020 to 2030. The trajectory, moving from USD180 billion in 2020 to a projected market size of USD1 trillion by 2030, is fuelled by government initiatives, technological integration, sustainability measures and increased investments. One of the most significant trends shaping India’s real estate landscape is the increasing focus on sustainability and technology. Sustainability is influencing green construction practices and energy-efficient designs, while technology is revolutionising aspects such as smart homes and data-driven insights. These trends are enabling developers to create more efficient and cost-effective building designs, while also providing buyers with a more immersive and interactive experience.
India’s real estate sector is thriving due to strong demand in residential and commercial sectors, affordable housing schemes, and investor-friendly policies. However, challenges include attracting investors, securing funding, developing infrastructure, and addressing the skill gap. Overcoming these requires substantial investments, innovative financing solutions, improved infrastructure, and a skilled workforce.
KPMG in India and NAREDCO have released a thought leadership report titled “Navigating the dynamics of real estate in India – Smart, sustainable and connected” at NAREDCO’s 16th National Convention. The report aims to initiate meaningful conversations among stakeholders and foster a deeper understanding of the opportunities and transformative trends shaping the sector.
Key highlights from the report include:
• Surge in domestic and foreign investments
India’s real estate market is experiencing significant growth due to joint ventures and direct investment from numerous players. Investment in urban infrastructure is projected to rise from 0.7% of GDP in 2011-12 to 1.1% by 2031-33. Private equity investments are expected to reach USD59.7 billion by 2047. The sector’s potential is promising due to government support, sustainability, and advanced technology integration.
• Emergence of Tier II and III cities
India’s real estate sector is witnessing the rise of Tier II and III cities, such as Surat, Bhubaneshwar, Coimbatore, Vadodara, Indore, Chandigarh, Kochi and Visakhapatnam, as significant contributors. These cities have demonstrated remarkable economic growth, improved connectivity and enhancement in infrastructure. Renowned for their attractive investment prospects, Tier II and III cities are attracting attention due to their abundant talent pool and affordability, making them appealing to both startups and established corporations, as well as industrial entities.
• Transformative potential of technology in the sector
India’s real estate sector is experiencing a surge in proptech startups, focusing on innovative solutions like AI-driven analytics and blockchain-based transaction platforms. Venture capital firms are showing increasing interest in these startups, indicating confidence in the potential of technology integration in the sector. Cities like Bengaluru and Hyderabad are becoming hubs for proptech innovation, transforming the real estate landscape.
• Embracing sustainability and building a green future
India’s real estate sector is embracing sustainability, with 82% of new Grade A office supply being green certified as of September 2023. The industry is adopting renewable energy sources, particularly solar power, and integrating circular economy principles in construction and maintenance practices. Government initiatives and tax incentives encourage developers to adopt sustainable design throughout the value chain.
Noteworthy findings also include:
• Institutional investments have experienced a remarkable surge, registering a 37 per cent year-on-year increase in the first quarter of 2023.
• Proptech start-ups secured a substantial USD 2.4 billion in investments between January 2021 and March 2023.
• India’s flexible office space stock is expected to reach 80 million sq. ft. by 2025, a significant increase from 47 million sq. ft., with Bengaluru leading with 14.6 million sq. ft. in 1H2022, followed by Delhi NCR, Hyderabad, Pune, and Mumbai.
• The growing demand for larger homes with premium amenities and infrastructure, especially in tech-driven cities like Pune, Chennai, Bengaluru, and Hyderabad, is driving the premium residential segment.
• The real estate investment trusts (REITs) have seen an increase in investment in office spaces, highlighting the developers’ strategy towards unlocking capital to expand portfolio, therefore contributing to urban development.
NAREDCO’s National President, G Hari Babu, praised India’s real estate sector, driven by RERA, REIT, and GST, for its potential to generate USD 1,000 billion by 2030. Despite challenges, the sector is committed to infrastructure development. The surge in investments and global players in Amrit Kaal’s real estate sector signals positive growth, with anticipated urban growth and Tier-II/III potential offering promising opportunities for the future.
Neeraj Bansal, Partner – Risk Advisory & Co-Head and COO, India Global, KPMG in India, said, “The real estate sector in India, which contributes 7.3% to the GDP, is expected to become a trillion-dollar market by 2030. The growth is driven by technology integration across the value chain, with proptech startups collecting USD2.4 billion in investments between January 2021 and March 2023. The fractional ownership market and flexible office space are expected to surge by 2025, with investments reaching USD8.9 billion and 80 million sq. ft. respectively. The sector contributes 39% of emissions and is set towards decarbonisation, with India ranking 3rd in LEED-certified green buildings.”
Way forward:
• Technology Adoption – Embrace emerging technologies such as Building Information Modeling (BIM), IoT, AI, among others, to enhance operational efficiency, streamline processes and stay at the forefront of innovation.
• Sustainability Integration – Prioritise sustainable construction practices by incorporating green building designs and utilising renewable energy sources to align with global environmental goals.
• Public-Private Partnerships (PPPs) – Foster collaboration between government bodies and private enterprises to address infrastructural challenges, streamline regulatory processes and encourage sustainable development.
• Upskilling Programmes – Collaborate with educational institutions and industry bodies to establish upskilling programmes for professionals in the real estate sector, ensuring a skilled workforce capable of navigating evolving demands.
• Digital Collaboration Platforms – Implement digital collaboration tools and platforms to streamline communication among stakeholders, foster transparency and reduce transactional complexities.
• Inclusive Development Projects – Prioritise inclusive development projects that contribute to social and economic well-being, creating spaces that cater to diverse needs and demographics.
