Indian Real Estate has Emerged as a Favorable investment Option Given the Volatility of the Market

Indian Real Estate has Emerged as a Favorable investment Option Given the Volatility of the Market

 Indian real estate is becoming the asset of choice for an increasing number of investors in both India and NRI amid rising inflationary pressures, market volatility and stock market stagnation. It is seen as a good choice due to its yield and the potential for further price increases across India, both in metropolitan areas and other cities. Rapid urbanization and population growth are driving demand for affordable housing in major Indian cities.

India's growth story is attracting Venture Capital (VC) interest in all segments of the Indian real estate sector, as property prices across India are already set to rise by 10-30% in 2022. A recent survey conducted by CII found that 59% of respondents are more likely to invest in real estate, while only 28% of them prefer to invest in the Indian stock market. Nagpur, Coimbatore and Indore have the highest year-on-year rental demand, driving the growth of the Indian commercial real estate sector. This expansion is also reflected in the office rental market, which is expected to grow by 10-15% next year. Some of the factors influencing this trend are:

Growth of Social Infrastructure in Tier II and Tier III Cities

Key trends are the increasing demand for modern office space and the emerging trend of urban and semi-urban living. Additionally, the country's expanding e-commerce sector is boosting demand for storage options, boosting the market. Additionally, increased use of telecommunications services, implementation of 5G standards, and data localization are increasing the demand for data storage options. This will have a positive effect on the demand for resilient data center infrastructure, enhancing market growth.

Increased adoption of hybrid models in 2022 has significantly increased office space in major cities. According to the study, the net absorption rate of the office market in the top seven cities including Mumbai, Bangalore and Hyderabad will reach 38.25 million square feet in 2022, a three-year high. Moreover, the net absorption rate in 2022 increased by 3.1% from his pre-pandemic five-year average (2015-2019), demonstrating the resilience of the Indian office market.

Increase in NRI investment

Domestic and foreign investors have benefited from this growth, especially in their home cities, with millennials making up about half of these investors. Investor interest is growing not only in commercial real estate, but also in ultra-luxury condominiums and vacation homes. A stronger dollar against the rupee provides investors with an incentive to increase purchasing power and enter the domestic market. Recent proptech platforms have contributed to this growing interest by revolutionizing the real estate industry and enabling seamless onboarding of individuals regardless of their geographic location. This will continue to attract non-resident Indians to the Indian property market.

Changes in the policy environment

Apart from that, various initiatives by the Government of India such as investments in smart city projects and mortgage interest tax exemption are expected to create lucrative business opportunities for domestic industrial investors. By 2030, demand for premium Grade A office properties in India is expected to reach 1.2 billion square feet. This expansion is driven by several factors, including high return on investment, increasing NRI and FDI investment, and increasing government initiatives.

Increased demand for ultra-luxury units and vacation homes

Rising household incomes and an increasing number of Indians among the world's richest individuals have resulted in a booming market for ultra-luxury residential real estate, with demand often outstripping supply. Even in markets that historically had a healthy pipeline of such units, such as Mumbai, Delhi, Bangalore and Kolkata, consumers are looking for projects with amenities comparable to those offered by international developers. This changing consumption habits has prompted Indian property developers to launch new luxury residential projects to cater to this growing domestic investor group.

Other important factors such as the rise of India as a global IT powerhouse, the growth of the e-commerce industry, etc. will significantly increase the demand for space such as data centers and sophisticated warehouses. Commercial space will increase in Tier II and Tier III cities in 2023, acting as an important catalyst for job creation. In 2022, the combined office, warehouse, residential and retail sectors will attract a total of $5.1 billion in private equity investment. This shows the industry's optimism for industry growth.

However, the developer community should try to achieve the same construction and design standards as the developed world. The focus will be on raising capital through additional channels such as real estate investment trusts (REITs) to attract more Indians to actively invest in the country's real estate industry.

As REITs offer proportional ownership of income-generating real estate investments, more Indian developers are setting up their own REITs, educating investors on their long-term value creation potential, and educating investors on the process. should seek more investment in This will attract more foreign investment and leverage India's large population to establish a sustainable financing model that will propel the Indian real estate industry to new heights in 2023.