Indian Real Estate Defying Global Challenges Amidst Socio-political Paradigm Shifts
The last three years have been a rather tumultuous period in modern history. From trade wars between the two reigning superpowers of the world to geopolitical tensions due to territorial disputes culminating in the form of devastating wars like Ukraine-Russia and Gaza-Israel to global pandemics, the surging geopolitical tensions have led to widespread fears of an impending catastrophic global recession.
Though the full extent of the effect these events have had will be unveiled in the coming years, one thing is clear: they have undoubtedly had serious ramifications on global currencies, investor confidence and sentiments, and global supply chains. While admittedly, these shocks have led to groundbreaking shifts in the global ecosystem, with significant social and economic repercussions, the Indian economy has resolutely withstood these calamitic forces.
The Indian real estate sector, for instance, despite being confronted with such unfavourable odds, grew considerably during this period. The country’s strong economic growth, the government’s PLI schemes to attract investments, the thriving manufacturing sector, surging foreign direct investment, and accelerated infrastructural development are just a few of the factors responsible for propelling the real estate industry.
Let’s review some of the major trends that reshaped the global political landscape and paved the way for the Indian real estate sector to gain a competitive edge.
The Robust Indian Economy
While the rest of the world’s economies have struggled tremendously in the last three years, the Indian economy has been labelled as the world’s ‘bright star’ by the IMF, being the fastest-growing economy in the world. Not only was 2023 the year the country finally emerged as the fifth largest economy in the world, if experts are to be believed, the country is well on track to be the third largest economy by 2030, in addition to continuing its run as the fastest-growing economy this year. The government’s rapid disinvestment to boost capital expenditure (CapEx) outflow, fiscal policy restructuring, tax subsidies, etc. have also substantially boosted the real estate sector.
Shifting Consumer Pattern
The onset of the pandemic significantly altered the demand pattern in the country. The increasing income of the middle and upper middle classes led to many desiring an aspirational lifestyle. The confinement to home owing to the pandemic’s restrictions and the resultant move to work-from-home mode led to many aspiring for more spacious homes with holistic amenities. This has led to a surge in demand for mid- and luxury housing segments.
This decade also led to the entry of millennials into the housing market for the first time. With the stable repo rate and therefore affordable home loans, rent, and EMI parity, many first-time home buyers are motivated to invest in the market.
Booming NRI & HNI Investments
Recent years have also witnessed a surge in demand for residential real estate in India from NRIs and HNIs. As mentioned above, India is currently undergoing a massive economic expansion. In addition to this, the country’s liberal economic policies, progressive infrastructure development due to programmes like the Smart Cities Mission, and a slew of policies like RERA working to make the sector easier to navigate than ever have led to increased investor confidence.
In addition to this, the falling Indian rupee as compared to major foreign currencies, the higher disposable income of NRIs, and the availability of Grade A spaces at an affordable price all culminate in curating an ideal ecosystem for investment.
A Positive Business Horizon
Another trend that 2023 witnessed was increased land acquisition by developers. This has come as a result of the government’s increased effort to usher in an era of last-mile connectivity, which has engendered many developments, both commercial and residential, in heretofore remote locales. This has helped developers meet the rising demand from consumers, thereby facilitating the stabilisation of property prices while increasing the options for homeowners and investors.
Yet another reason for the surge in the real estate industry is the availability of a wide array of new funding options like real estate investment trusts (REITs), initial public offerings (IPOs), fractional ownership, infrastructure investment trusts (InvITs), etc., which have provided investors with alternative sources of capital, allowing them to invest more effectively.
Resurgence of Demand for Commercial Space
The year 2022 brought with it an easing of the pandemic restrictions and, with it, a great return to office. This has led to a consistent surge in demand for office spaces, with occupancy for novel commercial real estate assets like coworking spaces and SCOs reaching an all-time high. An interesting trend, however, in 2023 has been the increasing demand for office spaces from non-IT sectors such as healthcare, manufacturing, R&D, e-commerce, BFSI, etc.
Final Thoughts
In a world grappling with challenges, India’s real estate sector emerges as a beacon of resilience and opportunity. The sector not only withstood global uncertainties but thrived, propelled by a robust economy, visionary government initiatives, and evolving consumer dynamics. As global landscapes shift, India’s real estate stands as a testament to its ability to turn challenges into avenues for growth and innovation.
