India's real estate sector is on the verge of unprecedented growth over the next three years, with both commercial and residential segments flourishing. Gulam Zia, Executive Director at Knight Frank India, highlights key factors driving this growth. From record-breaking office space absorption to the continued demand in residential real estate, the future looks bright for Indian real estate.
Office Sector Growth: Commercial Market Booming:
India’s office market has witnessed historical levels of absorption, particularly in the top eight cities, including Bangalore, Hyderabad, Mumbai, and Delhi NCR. According to Zia, the office absorption rate for this year is expected to surpass all previous records, signaling a strong commercial sector. One of the major contributors to this boom is the rise of Global Capability Centres (GCCs), which have shifted from back-office functions to upper-end research and development activities in India.
As GCCs focus on India for high-level research, approximately 40% of the total office absorption comes from this sector. This growing demand has caused rental values in prime commercial spaces to rise by 6-13%, depending on the location. This surge in commercial activity is expected to continue for the next few years, positioning India as a global hub for research and innovation.
Residential Market on the Rise: Sustained Momentum Expected:
While the commercial sector grabs headlines, the residential market is also performing exceedingly well. Zia emphasizes that the next two to three years will be crucial for the residential sector. Despite concerns about rising prices, the residential real estate market is expected to maintain momentum, especially with the help of government schemes like the Pradhan Mantri Awas Yojana 2.0.
Zia points out that while the luxury and mid-segment residential markets are thriving, affordable housing has seen slower growth in recent years. However, with renewed government focus, even this segment is poised for a comeback. Major developers are already reporting impressive revenues, further indicating that the residential market is on a steady upward trajectory.
Key Drivers of Real Estate Growth: Economic Resilience and Investor Confidence:
India’s economic growth and resilience are major contributors to the success of the real estate market. Zia explains that despite global economic challenges, the Indian market continues to thrive due to strong fundamentals, a young workforce, and increasing demand for both residential and commercial spaces. The rise in stock market activity has also created a positive feedback loop, driving real estate prices higher.
For international investors, India’s real estate market remains attractive, thanks to favorable policies, increasing transparency, and rapid urbanization. Over the next three years, the real estate sector will continue to benefit from these factors, making it a prime investment destination.
What to Expect in the Next Three Years:
According to Zia, the next two to three years will witness sustained growth across both the commercial and residential sectors. Developers are expected to launch new projects, and with rising demand for office spaces and homes, property values will continue to appreciate. However, Zia stresses that maintaining affordability, particularly in the residential segment, will be crucial to ensuring long-term growth.
While the commercial sector is seeing a surge in office absorption, the residential market will also experience a steady rise, driven by middle-class aspirations, urbanization, and government schemes. With no major economic headwinds in sight, India’s real estate market is set for continued success.
Conclusion:
The real estate sector in India is entering a phase of remarkable growth, supported by both commercial and residential demand. Gulam Zia’s insights point to a robust future for the industry, with record-breaking office absorption and sustained residential growth expected over the next three years. Whether you’re an investor, homebuyer, or developer, this is the perfect time to tap into India’s booming real estate market.
Comments