WHY ARE FOREIGN INVESTORS EYEING INDIA?

This year an Indian Realty major made an announcement. Its latest luxury residential project was ready it was in Gurugram. In India’s National Capital Region, the project opened for presale and within 72 hours it was sold out. We’re talking about 1113 luxury flats valued at 7200 crore rupees, all lapped up in just three days. In India, buying a house is a big deal, a social rite of passage and emotional experience and a guarantee of financial security. There’s also a lot of sentimental value attached. But is this sentiment alone driving India’s real estate market? Or are there other forces at play? 2023 was a bumper year for Indian real estate with 2024 for being bigger and better. That’s what we’ll discuss tonight. Hello and welcome. I’m DP Singh and this is “Between the Lines”.

It begins with India’s independence. Here was a nation that has been looted and plunder for centuries now free of occupiers trying to rebuild itself. So, the focus was on accessibility, not luxury, aka public housing projects. The government launched many of them all over the country. Then came the land reforms of the 50s and 60s Land was redistributed. The next big shift came in the 1980s. That’s when private housing entered the market and with liberalization in the 1990s it grew further. landscape projects came up, IT parks, shopping malls, big budget housing.

2024 India’s real estate market is among the fastest growing in the world. And it’s evident. If you live in an Indian Metro City, go out and look around the cultures may be different the language may be different. The food habits may be different, but there’s one thing you find everywhere, skyscrapers and cranes, the droning noise of construction is deafening. It’s also defining every major Indian city in 2023, India’s real estate market was worth around $265 billion, by 2030 it will be worth $1 trillion and by 2047 5.8 trillion that is the projection, imagine that a 12-fold rise between 2023 and 2047 which means a lot will change. 

Currently, real estate contributes to 7% of India’s GDP and employs over 50 million people. Cement steel glass. All these industries depend on real estate, by 2047 it could make up to more than 15% of the country’s GDP it will be a managed sector and the trends are clear. In 2022 homes worth 3.27 lakh crore rupees are sold the next year it went up to 4.50 lakh crores. That’s a 30% rise in just one year. So, the demand is strong. But where are these people investing? India has seven top residential markets Mumbai, Delhi NCR Bengaluru, Hyderabad, Chennai, Kolkata and Pune. Essentially the country’s biggest cities, and last year the city’s sold a lot of houses more than 4.76 lakh units in one year, a 31% increase since 2022. 

So, what’s driving the search? A lot of factors but the biggest one is India’s economy. It is shining in an otherwise gloomy global picture. Growth has been stable; the fundamentals are strong. Indian central bank has not hiked interest rates. All of this has driven up demand. Plus, with the economy. India’s middle class is also rising. They’re earning more they have more disposable income and they’re investing in real estate. The government supports this. It wants real estate to do. So, it’s offering incentives, there are tax reductions, subsidies for buyers and schemes for affordable housing. But it’s not just affordable that Indian buyers are seeking. A lot of them also want luxury premium properties. 

Now first things first, what defines luxury real estate in India? It’s typically anything price to 1.5 crore rupees. If you’re in Mumbai, it’s anything about 2.5 crores that’s luxury. These properties have a few defining factors that drive neighborhoods. They have amenities. There’s top notch infrastructure state of the art fitness Centre’s, infinity pools, rooftop lounge, shopping centers is this attention to detail that makes them appealing, and the rich want them in the first six months of 2022 the sale of luxury homes jumped by one 30% It was 3000 units in 2020 to 6900 units in 2023. That’s a one 30% rise. 

Then there’s ultra luxury homes. That’s real estate priced at over 40 crore rupees last year sales for that rose by 200% Almost 600 Such homes are sold in India’s top seven cities. The numbers may sound too good to be true, but it’s not happening out of the blue there have been signs and one of them is India’s rising affluent demographic by 2027. The number of millionaires in the country is set to increase by 69%. Then there are the ultra-high net worth individuals’ people with a net worth of $30 million and more. In the next three years, India will have at least 19,000 ultra-high net worth individuals. 

They want affluent lifestyles, and the first thing they want is luxury real estate and it’s not just housing index picking up there’s demand for other segments as well. I’m talking about your office spaces, co working spaces, malls, all of them have seen an uptick in sales. Also, industrial spaces, your warehouses, dark stores. Demand for those is also rising, growing e commerce businesses are fueling it and investors are tracking this surge. 

Including foreign investors. They want to invest in India’s real estate. In the first half of 2023, more than $4 billion flowed into India. This was in the form of private credit, and half of it went to real estate. So foreign investors want to invest here and they’re dumping China for it. China’s property market is going through a slump debt is piling companies are shutting shop and the middle class is better. Foreign investors or any investors for that matter do not like such volatility so they’re turning to India. Here they get a growing economy, a favorable demographic, and a stable government. It’s almost an easy choice and it’s working out for in India’s favor. 

So, to sum it up, more people are buying houses, more houses are being built, foreign money is pouring in and it all looks very good. But no success story is without challenges and India’s real estate story has its own share of challenges. The first is the cost of land. It is rising across the country. India is now the 14th most expensive residential real estate market globally, which means affordable solutions are few and far between. 

Having said that, the sentiment still remains positive. Real estate is booming in India, and it’s expected to continue to grow in the years to come. It’s also a reflection of India’s journey of a country where dreams are built. And realized one brick at a time.

Cheers!

DP Singh

“Spread Knowledge & Joy”