NSDL or National Securities Depository Limited is a financial institution that was established to keep securities like shares, bonds, etc in the shape of non-physical or physical certifications, that is in demat format. The securities are maintained in deposit accounts, which are similar to funds in bank accounts. It allows for quick securities transfer because ownership gets transferred merely by ledger entries. This is frequently done digitally, saving the extra time required in the previous practice of exchanging physical certificates once a deal was concluded. India’s capital market, which has been around for almost a century, has always been quite active. But, due to settlements that are based on paper, it had significant flaws such as poor delivery, prolonged transference execution, and so on. To address these concerns, the Depositories Act 1996 was enacted and went into effect on Sept 20, 1995. This legislation mandated the Security Depositories establishment in India to manage securities. Security is a financial asset that…
Real Estate Investing - How Much Will The Sector Grow Till 2030?
In 2017, the Indian real estate market was valued at over 120 billion dollars, and it is expected to reach one trillion dollars by 2030. These were estimations made before the coronavirus (COVID-19) pandemic was assessed.
The best industry in the world is real estate. Housing, retail, hospitality, and business are the four sub-sectors. The expansion of this industry is aided by the expansion of the business environment as well as the demand for office space and also urban and semi-urban lodging. In terms of direct, indirect, and induced impacts in all sectors of the economy, the construction sector ranks third among the 14 major industries.
After agriculture, the real estate business in India is the second-largest employer. This industry is also likely to attract greater non-resident Indian (NRI) investment in the medium and long term. NRIs are projected to choose Bengaluru above Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun as property investment destinations.
Real Estate Market Size
From Rs. 12,000 crores (US$ 1.72 billion) in 2019, the real estate industry would rise to Rs. 65,000 crore (US$ 9.30 billion) by 2040. India’s real estate market is predicted to grow to US$ 1 trillion by 2030, up from US$ 200 billion in 2021, and contribute 13% of the country’s GDP by 2025. Retail, hotel, and commercial real estate are all seeing considerable growth, supplying India with much-needed infrastructure.
In only one year, approximately 1,700 acres of land were sold in India’s top seven cities. From 2017 to 21, foreign investments in commercial real estate totaled US$ 10.3 billion. Developers anticipate a surge in demand for office space in SEZs once the present SEZs legislation is replaced in February 2022.
According to ICRA, Indian companies are likely to raise more than Rs. 3.5 trillion (US$ 48 billion) via infrastructural and real estate investment trusts in 2022, compared to US$ 29 billion raised so far. From July to December 2020, the office market inside the top eight cities had 22.2 million square feet of sales, while new completions totaled 17.2 million square feet.
In the second half of 2020, the Information Technology (IT/ITeS) sector dominated with a 41 percent share, followed by the BSFI and Manufacturing sectors with 16 percent each, and the Other Services and Co-working sectors with 17 percent and 10%, respectively.
In India, over 40 million square feet were delivered in 2021. In the next 2-3 years, the country is predicted to have a 40 percent market share. In 2022, India is estimated to produce 46 million square feet. According to Savills India, data center demand is estimated to grow by 15-18 million square feet by 2025. At 5.7 million square feet, the industrial sector will account for 24 percent of office space leasing in 2020.
Between Pune, Chennai, and Delhi NCR, SMEs and electronic component manufacturers rented the most, followed by auto sector leasing in Chennai, Ahmedabad, and Pune. The 3PL, e-commerce, and retail industries each accounted for 34%, 26%, and 9% of office space rentals, respectively. The office category received 71 percent of total PE real estate investments in Q4 FY21, followed by retail (15 percent), residential (7 percent), and warehousing (7 percent).
In 2021, India’s gross lease volume in the top eight cities was 16.2, up 12.4 percent from the previous quarter. In the fourth quarter of 2021, India’s net absorption of the office market was 11.56 million square feet. This was an 86 percent increase from the previous quarter. A total of 55,907 new dwelling units were sold in India’s eight micro marketplaces between July and September 2021. (59 percent YoY growth).
New housing supply in the third quarter of 2021 (between July and September 2021) grew by 228 percent YoY across the top eight cities, compared to 19,865 units introduced in the third quarter of 2020.
The business sector is likely to see increased investment in 2021-22. For example, Chintels Group stated in October 2021 that it would spend Rs. 400 crore (US$ 53.47 million) in a new commercial complex in Gurugram that will span 9.28 lakh square feet. According to the Economic Times Housing Finance Summit, around three houses are created per 1,000 people every year, compared to the needed five dwellings per 1,000 inhabitants. The present housing deficit in cities is projected to exceed ten million units. By 2030, an extra 25 million units of affordable housing will be needed to accommodate the country’s urban population growth.
Initiatives of Government
The Indian government, in collaboration with state governments, has taken several steps to promote growth in the industry. Real estate businesses should take advantage of the Smart City Project, which aims to develop 100 smart cities. Other notable government efforts are listed below:
The RBI declared in October 2021 that the benchmark interest rate would remain at 4%, providing a significant boost to the country’s real estate sector. Low house loan interest rates are predicted to fuel housing demand and boost sales by 35-40% during the holiday season of 2021. Tax deductions on interest on housing loans up to Rs. 1.5 lakh (US$ 2069.89) and tax holidays for affordable housing developments have been extended till the end of fiscal 2021-22, according to the Union Budget 2021-22.
Income tax relief measures for real estate developers, as well as homebuyers for primary purchase/sale of housing units of value (up to Rs. 2 crores (US$ 271,450.60) from November 12, 2020, to June 30, 2021), were included in the Atmanirbhar Bharat 3.0 package announcement was made by Finance Minister Mrs. Nirmala Sitharaman in November 2020. The government has established an Affordable Housing Fund (AHF) at the National Housing Bank (NHB) with an initial capital of Rs 10,000 crore (US$ 1.43 billion) to use priority sector lending shortfalls of banks and financial institutions for HFC microfinance.
India had legally sanctioned 425 SEZs as of January 31, 2021, with 265 of them currently functioning. The IT/BPM industry is home to the majority of special economic zones (SEZs). The Union Cabinet has authorized the establishment of an Rs. 25,000 crore (US$ 3.58 billion) alternative investment fund to resuscitate over 1,600 delayed housing projects throughout the nation (AIF).
The Securities and Exchange Board of India (SEBI) has approved the Real Estate Investment Trust (REIT) platform, allowing all types of investors to participate in the Indian real estate market. In the next years, it will offer a market potential worth Rs. 1.25 trillion (US$ 19.65 billion) in India. Indian real estate developers have altered gears and embraced new difficulties in response to an increasingly well-informed consumer base and the globalization factor. The transition from family-owned to professionally managed firms has been the most noticeable change.
To address the increased need for managing various projects across cities, real estate developers are investing in centralized systems for sourcing materials and organizing the workforce, as well as recruiting experienced specialists in project management, architecture, and engineering.
The residential sector is set to expand dramatically, with the federal government intending to build 20 million affordable dwellings in metropolitan areas across the country by 2022 under the Union Ministry of Housing and Urban Affairs’ ambitious Pradhan Mantri Awas Yojana (PMAY) scheme. The need for commercial and retail office space will rise as the number of dwelling units in metropolitan regions grows.
The present housing deficit in cities is projected to exceed ten million units. By 2030, an extra 25 million units of affordable housing will be needed to accommodate the country’s urban population growth.
Increased transparency is being encouraged by the rising influx of FDI into Indian real estate. To get investment, developers have updated their accounting and management systems to fulfill due diligence requirements. With US$ 8 billion in capital infusion by FY22, Indian real estate is likely to attract a significant amount of FDI in the following two years.
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FAQ'S On Real Estate Growth Till 2030
House prices in India fell 0.9 percent YoY in December 2021, following a 5.0 percent YoY gain in the previous quarter. Year-over-year growth data is provided from March 2011 to December 2021, with just an average growth rate of 5.5 percent.
Mortgage rates will rise slightly but remain historically low, house sales will hit a 16-year high, and pricing and rent increases will be much lower than in 2021. Many people will be concerned about affordability since housing prices should continue to climb, albeit at a slower rate than in 2021.
The residential real estate units are delivered to the customers within the agreed-upon time range. Builders and developers have been more accountable and transparent. In the next years, real estate players will be required to follow the law and make investing simpler.