Blog Details
Indian real estate properties: a significant milestone to prosperity
In the past couple of days, there has been evident fluctuation in the Indian market. Amid varioustransformations and market corrections, good news finally slew in the market. It has not only showna confidence-building approach to investors but a secure, bright future as well. Let us dig out how Indian real estate properties are still a beneficial option for others.
Offlate a report of Knight Frank and NAREDCO published their real estate sentiment index for the first quarter of 2024. This report reveals a decade-high confidence level among investors in the real estate sector. The report also considers the economic factors that act as a tailwind to the residential and office sectors.
1. The change agent of growth: According to the latest report, the current sentiment score ranks at 72, which was 69 last year. Which strongly advocates a strong, optimistic market ahead. Moreover, there are various other factors also associated with it that act as catalysts to boost the confidence of investors to remain loyal to their choice of real estate investment. These are:-
Demand-driven sector: The report reveals significant year-on-year incremental sales in residential properties and office space of 9% and 43%, respectively. Which reveals a glorious picture of increasing market growth. Most importantly, the increasing demand is because of the rising demographic dividend and the rise of high-net-worth clients. Besides, ease of doing business and other such indices also demand strong infrastructure and the need for many such commercial properties that can augment their income along with the luxury of lifestyle.
Stable economic environment: Various reports and media posts are flooded with positive pictures of robust economic growth. Notably, the Indian growth projection lies between 6.5 and 7%, which is way ahead of most economies. Stable yet lower interest rates, government support, and initiatives also act as a stimulus for growth.
Steady and sustainable momentum: Indian real estate has succeeded in maintaining steady and sustainable growth on various occasions. The resilience against the COVID-19 pandemic situation is evident enough to prove the point. It has a positive effect as well that leverages the importance of strong infrastructural needs. Moreover, the industry is still recovering, and increasing transaction volumes are a real indicator of growth and a better prospect ahead.
2. The galloping growth of the sector: The bullish outlook of investors and the demand-push factor are the real factors driving the market and fanning the trend of growth. However, certain key metrics make the stakeholders optimistic about riding the wave for commercial and residential properties. These are:-
Augmenting property prices: The report further illustrates that 82% of respondents anticipated an increase in property prices. Various pieces of information and news have been kept floating across various news channels and papers that stamp the surging price of the property. In addition, it has not been confined to a particular type of property but to the overall sector as well. This expectation acts as a catalyst to push the demand for different types of properties.
Growth in leasing activity: On various accounts, there has been a significant growth in leasing activity recorded. Commercial leasing activity is expected to increase significantly over the next six months. Post-pandemic office space requirements, growing business needs, and demand for various new ventures are major reasons for to increase in commercial property demand.
Incremental growth in sales: It is worth mentioning that the report shows that 73% of respondents believe there has been an increase in sales of residential property in comparison to last year. In addition to this, the India Brand Equity Foundation (IBEF) report has also highlighted an estimated shortage of 10 million units of residential space in urban areas, which is expected to increase to an additional 25 million units of affordable housing by 2030. Similarly, Savills India has also confirmed a sharp increase in the sale of luxury homes in India by 130% in the first half of 2023 in comparison to last year's sales record. With the incremental growth of sales volume in various property types, this sector shows positive growth.
New property launches: According to the report, there has been an 80% increase in new residential property launches expected in the next six months. Which also validates the strong need for new projects. According to Knight Frank, over 328 new housing units were launched in 2022, and PMAY reached 6.5 million units. Furthermore, the need for 15 to 18 million additional sq. ft. of space for the data center is also expected by 2025.
Other factors: Various other reports and data also suggest that franchising ownership yield ranges between 8 and 10%, rental yield of commercial property is approximately 9%, and value appreciation of commercial property is recorded at 5 10% growth every year. Similarly, a startling survey reveals an average price appreciation of residential property of 3.5% in a year. In addition, the National Housing Bank has also stated an incremental growth of 10% in India.
Conclusion: In light of the above facts, reports, and data, it is clear that Indian real estate properties are writing a new saga of growth. Strong government support, steady interest rates, and rising demand for properties are some of the prominent factors that paint a rosy picture of this sector. Moreover, the president of NAREDCO also emphasized the anticipated expansion of this sector. Shishir Baijal, the chairman and managing director of Knight Frank India, also expected the same, as the moment will further continue and be fuelled through sufficient fund availability, which will develop a positive sentiment among the investors.
