India’s Real Estate Poised to Drive Economic Growth: Report
As India approaches its centenary year of independence, a new report by Colliers and CREDAI explores the role of real estate in the country’s economic growth trajectory. According to the report, real estate is set to play a pivotal role in India’s economic expansion over the next few decades, with the potential to become a USD 10 trillion market by 2047, accounting for a significant 14-20% share in the GDP.
Creating Real Estate Hotspots
The report highlights the potential for the real estate sector to create multiple hotspots as India continues its economic growth journey. Core assets such as office and residential real estate are expected to continue maturing, while alternative assets like data centers and senior living will experience strong growth trajectories. With market consolidation and fair pricing becoming more prevalent, the industrial and warehousing segment is also expected to witness institutionalization.
Raipid Urbanization and Growth Beyond Tier I Cities
The report forecasts that by 2050, around half of India’s population will live in urban agglomerations. This rapid urbanization, coupled with infrastructure development and employment opportunities, will lead to an expansion of real estate beyond the tier I cities. Smaller towns and cities will become new growth centers, with accelerated development across asset classes. Peripheral areas of established cities and tier II and III cities will particularly benefit from this dispersed growth.
Demographics Driving Housing and Retail Real Estate
Shifting demographics will play a significant role in the real estate sector, particularly in housing and retail. As a substantial portion of the Indian population enters the age bracket of potential first-time homebuyers, healthy traction is expected in the housing market in the coming decades. Additionally, the rising number of older people may lead to increased investment in the senior living market.
Expansion of REITs and Alternative Investment Avenues
The report predicts that in the next few years, asset classes under Real Estate Investment Trusts (REITs) and Small and Medium-scale REITs (SM REITs) will expand beyond offices and retail to include warehouses, hotels, and rent-yielding residential properties. In the long run, these financing avenues will also become prevalent in alternative real estate sectors such as data centers, hospitals, educational institutes, and senior and student living accommodations. The access to such diversified funding is expected to grow due to spurt in foreign capital and contribution from domestic investors.
Digitalization and Sustainable Development
Digitalization is set to play a significant role in the Indian real estate sector, impacting various aspects from planning, design, and construction to property and facilities management. The report predicts that PropTech and the Metaverse will mature, elevating Indian real estate to global standards of operational efficiency, transparency, and accountability. The increasing trend of digital consumption, growing internet penetration, and the rise of online services are also expected to boost the demand for co-location and edge data centers.
Sustainability is also a key focus in the report, highlighting the incorporation of sustainable elements during construction. Green certifications, already an important consideration in the office market, are expected to become a hygiene factor, with green adoption rising from 60-70% to nearly 100% in the coming years. Advanced technologies will aid in decarbonizing the real estate sector and promote environmentally-friendly practices.
With the expected growth and advancements, the Indian real estate sector looks promising in contributing to the country’s economic development while embracing sustainability and technology to create a vibrant and efficient industry.
