In 2024, the Indian real estate market is poised for significant growth and transformation. In a special episode, we sat down with two industry stalwarts, Mr. Boman Irani, CMD of Rustomjee, and Mr. Anshul Jain, Managing Director of India and Southeast Asia at Cushman & Wakefield, to discuss the performance of the real estate sector in 2023 and the outlook for 2024.
2023: A Defining Year for Residential Real Estate
Mr. Boman Irani kicked off the discussion by highlighting the remarkable performance of the residential real estate market in 2023. According to him, the year witnessed the sale of approximately 4.5 lakh crore worth of houses, a staggering 38-40% increase compared to the previous year. This growth was particularly noteworthy in the luxury housing segment, with 67% of the luxury homes sold being more spacious and primarily located in gated communities.
“The year of 2023 was a defining year for real estate. And I believe that all our developers have done a great job.” – Mr. Boman Irani
Mr. Anshul Jain concurred with Mr. Irani’s assessment, stating that the COVID-19 pandemic had accelerated the growth of the residential real estate market. He emphasized that the demand for homes was robust across all segments, from luxury to mid-tier and affordable housing.
Factors Driving the Demand for Larger Homes
The discussion delved into the reasons behind the increasing demand for larger homes. Mr. Irani explained that while the sales of smaller houses had not decreased, there was a notable rise in the sales of luxury homes. He pointed out that in major markets like MMR, NCR, Bangalore, and Chennai, houses worth more than 1.5 crore were easily sold, as they met the space requirements of buyers seeking proper 3-bedroom or 2.5-bedroom homes.
“After COVID, people need more space in their homes. In the past, balconies were controlled by all developers, at least the developers of Mumbai. There is no point in giving more than 30 square foot or 40 square foot. Or 100 square foot is not foot In today’s time, good projects, whatever you give, but it is very important to have a balcony Similarly, a special place in the houses where people can operate, run office or study, this has become a reality” – Mr. Boman Irani
Commercial Real Estate: A Mixed Bag
Moving on to the commercial real estate sector, Mr. Anshul Jain provided insights into its performance in 2023. He noted that while the sector did not perform as well as it did in 2022, it was essential to recognize that 2021 and 2022 were historic years for commercial real estate. The slowdown in 2023 was relatively minor, with a 5-7% decline compared to the previous year.
However, Mr. Jain highlighted that the demand for commercial real estate remained strong, with Indian companies, particularly in the pharmaceutical and manufacturing sectors, taking up significant space. He also mentioned the potential impact of the recent government notification allowing Special Economic Zones (SEZs) to deal in local markets, which could lead to more space availability and range-bound rental prices.
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The Growth Path for Indian Real Estate
Looking ahead to 2024 and beyond, both experts expressed optimism about the growth prospects of the Indian real estate market. Mr. Irani cited a compelling statistic, stating that by 2030, 675 million people are expected to live in tier 1 and tier 2 towns and metros. This population shift, coupled with India’s economic prosperity and rising per capita income, sets the stage for tremendous growth in the real estate sector.
“The growth path for India has been set. 23 has been a curtain raiser. And from 24, the growth you will see, and I am hoping Anshul ji has said that I also am not an advocate of increasing prices, whether it is rentals or the end use price. According to me, the more people we can give good quality houses, the faster we can give them, we will reduce the complexity, we will improve their buying ability through technology, we will resolve their problems through residence. The golden period in the real estate case and I have no doubt in this.” – Mr. Boman Irani
Mr. Jain concurred, emphasizing that the momentum gained by the Indian real estate market is expected to last for the next 8-10 years. He drew parallels between the current environment in India and the growth experienced by China between 2005 and 2010. However, he cautioned against policy reversals and excessive exuberance, which could hinder the sector’s progress.
Key Areas of Focus in 2024
When asked about the key areas of focus in 2024, Mr. Irani highlighted the immense potential in MMR, where infrastructure development is in full swing. He mentioned the upcoming opening of the MTHL Bridge and the progress in metro construction, which will add significant value to the region. Additionally, he emphasized the importance of social infrastructure growth, including good schools, colleges, hospitals, and entertainment areas.
Mr. Jain, on the other hand, expressed bullishness on the residential market and the prospects of secondary cities. He pointed out that big companies and manufacturing units are moving to these cities, driving economic growth and, consequently, the demand for residential, industrial, warehousing, commercial, and retail spaces. He also anticipated a strong comeback from US companies in the commercial real estate sector, particularly in the second half of 2024.
Conclusion
In 2024, the Indian real estate market presents a promising landscape for investors and home buyers alike. The insights shared by industry experts Mr. Boman Irani and Mr. Anshul Jain paint a picture of sustained growth, driven by factors such as population shift, economic prosperity, and infrastructure development.
While the residential market is expected to maintain its upward trajectory, with a growing demand for larger homes and luxury housing, the commercial real estate sector is likely to witness a resurgence, particularly in the second half of the year. The potential of secondary cities and the impact of policy changes, such as the denotification of SEZs, add further dimensions to the growth story.
As we navigate this exciting phase in the Indian real estate market, it is crucial for developers, investors, and home buyers to remain cautiously optimistic, seize the opportunities that arise, and contribute to the sector’s golden period of growth.
In 2023, the Indian residential real estate market saw remarkable growth, with approximately 4.5 lakh crore worth of houses sold, marking a 38-40% increase compared to the previous year.
The demand for larger homes increased due to a shift in buyer preferences post-COVID, as people sought more space in their homes, including features like balconies and dedicated workspaces.
The commercial real estate sector experienced a minor slowdown in 2023, with a 5-7% decline compared to 2022, but demand remained strong, especially from the pharmaceutical and manufacturing sectors.
Experts express optimism for the Indian real estate market in 2024, expecting sustained growth driven by economic prosperity, a population shift, and ongoing infrastructure development.
Key areas of focus in 2024 include the Mumbai Metropolitan Region (MMR), where significant infrastructure projects like the MTHL Bridge and metro construction are underway, as well as secondary cities experiencing economic growth.
By 2030, it is expected that 675 million people will live in tier 1 and tier 2 towns and metros, which will significantly drive demand for housing and real estate development.
The luxury housing segment is performing well, with 67% of luxury homes sold being more spacious and located in gated communities, reflecting a growing preference for larger, high-quality living spaces.
A strong comeback from US companies in the commercial real estate sector is anticipated in the second half of 2024, alongside continued demand from local industries.
Potential challenges include policy reversals and excessive exuberance in the market, which could disrupt the momentum gained by the sector.
Investors and home buyers should remain cautiously optimistic, seize opportunities as they arise, and contribute to the ongoing growth in the Indian real estate market.
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