Invest In India

Unlocking India's Real Estate Potential: A Comprehensive Overview for Savvy Investors

Welcome to Rane Engineers and Surveyors Pvt. Ltd., your trusted partner in real estate and plant machinery valuation. As valuers deeply embedded in the Indian market, we understand its unique dynamics. India's real estate sector is an ever-evolving and intriguing space, offering compelling opportunities for both personal use and investment. This overview aims to highlight why India presents a remarkable investment landscape, inviting you to explore its vast potential.

The Indian Real Estate Landscape: A Dynamic Snapshot

The Indian real estate sector is a powerhouse of economic activity. It stands as the second-highest employment generating sector in the country, after agriculture. Projections are robust, with the sector expected to touch USD 1 trillion by 2030 and contribute over 13% to India’s GDP. This growth trajectory underscores a market brimming with vitality and long-term promise.

A significant shift towards digital engagement is evident, with the internet being the most preferred medium for real estate searches in India. Notably, around half of all real estate transactions in the country are conducted online.

Why Invest in India Now? Key Drivers Fueling Growth

Several factors converge to make India an attractive destination for real estate investment:

• Robust Economic Growth and Stability: India is poised to be a driving force in the global economy, consistently maintaining its distinction as one of the fastest-growing large economies in the world. With GDP growth exceeding 8% in FY 2024 and a revised outlook of 7.2% for FY 2025 from the Reserve Bank of India, the country offers a strong economic foundation. The continuity in growth initiatives, especially with the central government's third term, further bolsters economic stability.
  
  

• Unprecedented Demand and Urbanization: India's real estate market is characterized by robust and sustained demand from end-users. The demand for real estate in India is expected to increase by approximately 15-18 million square feet by 2025. The country has around 300 million households, indicating a need for at least 300 million houses. Rapid urbanization and a burgeoning middle class are significant growth drivers, particularly for better living spaces. Post-pandemic trends show a preference for large and secure homes, and a surge in demand for homes in Tier 2 & 3 cities, along with continued interest in ready-to-move-in properties.
  
  

  • A notable shift towards premiumization is occurring in the residential market, with homes priced over INR 10 million emerging as the largest segment, accounting for 41% of sales and experiencing the most growth in H1 2024. Sales in the luxury segment (INR 1 crore to over INR 5 crore) saw remarkable jumps in 2024, with some categories increasing by as much as 86%. This surge is driven by higher disposable incomes, the growing desire for personalized living experiences, and a post-pandemic shift towards larger homes with amenities like home offices and wellness spaces.

• Transformative Infrastructure Development: Significant investments in infrastructure, including new metro lines, airports, and expressways, are continuously enhancing connectivity and desirability of various regions. Cities like Mumbai are benefiting from projects like the Atal Setu bridge and coastal roads, which are improving connectivity and boosting property demand.
  
  

• Regulatory Reforms and Enhanced Transparency (RERA-Age): The introduction of the Real Estate Regulatory Act (RERA) in 2016 has been a pivotal transformation. RERA has made the sector more structured and regulated, curbing malpractices and offering a secure ecosystem to buyers. It has significantly boosted transparency and accountability in the real estate sector. While challenges in land title clarity and litigation delays persist, India has been adjudged as the "best improver" in the Asia Pacific (APAC) region for transparency due to reforms like RERA and the digitization of land records.
  
  

• Evolving Investment Avenues: The Indian real estate market has seen a marked increase in private investments, with private equity investments touching USD 2.9 billion in the first half of FY21, double the investment of the previous year. The introduction of Real Estate Investment Trusts (REITs) in 2019 was a significant shift, offering alternative investment avenues and enhancing liquidity, particularly in the commercial segment. Institutional investments are focusing on Grade A office assets due to their high growth potential. The participation of domestic institutions in large-scale transactions is also increasing.
  
  

• Key Growth Segments and Cities:
  
  

  • Residential: Beyond the luxury segment, the mid-range segment (INR 50 lakh to INR 1 crore) has shown remarkable stability. While affordable housing has seen some decline due to rising costs and shifting preferences, the overall demand for housing remains high. Cities like Hyderabad recorded an all-time high in residential sales in H1 2024, and Mumbai reached a 13-year high. Bengaluru, Pune, Chennai, and Kolkata also witnessed healthy sales growth and increasing prices in H1 2024.

  • Commercial: The office market is experiencing considerable churn, with India-facing businesses, Global Capability Centres (GCCs), and flexible workspaces capitalizing on unique growth opportunities. Bengaluru remains the largest office market by transaction volumes, and Mumbai and NCR recorded their best-ever half-yearly performances in H1 2024. The Indian office market is anticipated to conclude 2024 on a record high. Other sectors to watch for promising risk-reward outcomes include retail and value-add offices, which have seen repricing.

  • Emerging 'Real Asset' Sectors: There is growing interest in assets "at the intersection of real estate and infrastructure". Logistics, data centers, and new energy infrastructure are at or near the top of sector rankings globally due to digitization, AI growth, and energy security needs. These sectors offer high-yielding opportunities.

• Cultural Drivers of Demand: The Indian homebuying decision is deeply influenced by cultural factors. The strong cultural emphasis on homeownership rather than renting continues to drive demand. Factors like proximity to extended family, safety of the neighborhood, access to community amenities (e.g., temples, schools, markets), and adherence to Vastu Shastra principles are significant in property selection. Additionally, auspicious timings and festivals like Akshaya Tritiya, Dhanteras, and Diwali often see a surge in property purchases and promotions.
  
  

Navigating the Market: A Balanced Perspective

While India offers immense potential, it's essential to acknowledge its market nuances. Challenges such as the historical presence of black money circulation in transactions and the need for more transparent land use planning and implementation have contributed to higher prices relative to affordability benchmarks. India's housing remains expensive relative to its affordability yardstick (price-to-income ratio of 11, compared to 3.6 in the US). Despite this, the market has shown resilience and growth, with unsold inventory gradually being absorbed and prices appreciating across major cities.

For foreign investors, currency volatility (Indian Rupee depreciated ~18% vs USD from 2019-2024) and inflation (about 25% over the same period) can impact real returns. However, the optimistic economic outlook, ongoing infrastructure projects, and the shift in consumer preferences towards premium homes suggest a strong performance expected in 2025 and beyond, especially in the mid to high-end segments. Diversifying investments across income-focused Western properties and growth-oriented Indian markets is a strategy many investors consider.

Your Partner in India's Real Estate Journey

At Rane Engineers and Surveyors Pvt. Ltd., we understand these intricate layers of the Indian real estate market. Our expertise in real estate valuation provides the clarity and insight necessary to make informed investment decisions. As the market continues to evolve, our professional guidance is crucial in navigating its complexities and capitalizing on the promising opportunities.

Contact us today to understand how our valuation expertise can empower your real estate investment strategy in India.