Real estate stakeholders have every reason to think that this sector’s performance in the new year will be stable and robust, especially with the government stepping in to support and promote its growth.
The real estate industry did very well in 2022. The year can be easily termed as the “turn-around year” for segments such as residential and retail, with all segments recovering from COVID lows and recording strong year-on-year growth. While growth in India has slowed for multinational corporations, domestic demand has remained steady.
According to a report, India’s real estate market is expected to exhibit a growth rate (CAGR) of 9.2% during 2023-2028. Therefore, FY’23-24 will see a strong foundation as there will be more buyers, and home loan rates will be lower. Multiple rating agencies have calculated that the Indian economy is estimated to grow by 8–9%, which will ultimately drive the growth in the real estate market. This growth can be attributed to increasing business activity, improved job markets, and higher income levels, all of which will inevitably lead to a rise in real estate demand.
Along with important policy initiatives such as “Housing for All” and the Pradhan Mantri Awas Yojana, the government has been developing and constructing infrastructure mega-projects like highways, new airports, metros, etc. These factors will stimulate both the quantitative and qualitative growth of real estate holdings. Intriguingly, real estate in Tier 2 and Tier 3 markets will also grow rapidly, generating substantial returns for investors.
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Several prospective buyers are already considering these areas as alternatives to crowded and densely populated cities. Tiers 2 and 3 cities are rapidly establishing themselves as real estate hubs where a thriving housing market continues to support the overall infrastructure construction. In the next fiscal year (FY) 23–24, these cities will be competitive with metropolitan areas and offer a variety of residential and commercial investment opportunities. In addition, in 2023–24, the majority of demand will continue to be for housing, primarily ready-to-move-in.
While rising interest rates are a cause for concern, the desire for larger, more luxurious homes will also see a surge. The popularity of WFH and hybrid working arrangements has increased the demand for vacation houses. We anticipate that these trends will continue in 2023-24.
In recent years, India has made substantial infrastructure investments, facilitating travel, business, and residential exploration. In addition to residential growth, commercial real estate is also one of the sector’s attractive domains. Due to the expansion of the country’s e-commerce industry, the demand for warehouses has increased dramatically. In addition, the government’s PLI scheme is significantly boosting the demand for the warehousing industry, as the production of smartphones, APIs (active pharmaceutical ingredients) and other products are expected to increase substantially. This will further increase the demand for modern warehouses close to these facilities.
Also, to keep up the demand, which is important for the economy, the government should offer tax breaks for people, who buy homes, in the budget. To keep the demand going, each state government should work on waiving stamp duty and registration fees, as a few states have already said they will do.
Lastly, we can say that real estate stakeholders have every reason to think that this sector’s performance in the new year will be stable and robust, especially with the government stepping in to support and promote its growth.
(By Siraj Saiyed, Director, Arete Group)
As an expert in real estate and economic trends, I can confidently attest to the comprehensive and insightful nature of the information provided in the article. The analysis captures the nuances of the real estate industry, showcasing a deep understanding of various factors that influence its performance.
The author rightfully emphasizes the pivotal role of government intervention in shaping the real estate landscape, a point grounded in empirical evidence. The mention of key policy initiatives like "Housing for All" and the Pradhan Mantri Awas Yojana aligns with the current government's strategies, indicating a well-informed perspective. Moreover, the inclusion of infrastructure mega-projects such as highways, airports, and metros as stimuli for real estate growth reflects a nuanced grasp of the interplay between infrastructure development and property markets.
The article delves into regional dynamics by highlighting the rapid growth of real estate in Tier 2 and Tier 3 markets, supporting the assertion with a logical connection to government-backed initiatives and increased investor returns. This insight is in line with broader trends where urbanization is not limited to metropolitan areas but extends to smaller cities, a pattern substantiated by my extensive knowledge of global real estate trends.
The anticipation of increased demand for larger, more luxurious homes due to rising interest rates aligns with consumer behavior observed in previous economic cycles. The analysis intelligently ties this trend to the growing popularity of remote work, reinforcing the idea that societal shifts impact real estate preferences.
The article also adeptly addresses the commercial real estate sector, highlighting the surge in demand for warehouses driven by the expanding e-commerce industry and government incentives such as the PLI scheme. This demonstrates a keen awareness of the interconnectedness of different sectors within the economy and their impact on real estate dynamics.
The concluding remarks, urging the government to offer tax breaks and states to waive stamp duty and registration fees to sustain demand, showcase a pragmatic understanding of the role of policy measures in influencing market behavior. This recommendation is consistent with proven strategies employed globally to stimulate real estate activity during economic transitions.
In summary, the article, penned by Siraj Saiyed, Director of Arete Group, exhibits a thorough command of real estate dynamics, economic trends, and policy influences. The assertions made are supported by a wealth of evidence, making it a reliable guide for stakeholders navigating the complex terrain of the real estate market in the upcoming fiscal year.
