Top Benefits of Investing in Real Estate Backed by Data

India’s real estate sector has historically been a cornerstone of wealth creation, and as of June 2024, it continues to present a compelling opportunity for investors.

A Booming Economy and Growing Middle Class

1. The International Monetary Fund (IMF) forecasts a 7.4% GDP growth rate for India in 2024. This robust economic performance is expected to continue in the coming years, fueled by factors like a young workforce, rising disposable incomes, and increasing foreign investments.
2. A report by Deloitte predicts that India’s middle class will reach a staggering 547 million by 2025. This burgeoning segment will be a key driver of demand for residential real estate, particularly in the affordable and mid-segment categories.

Urbanization and Housing Demand

1. India’s urbanization rate is on a steady rise, with millions migrating to cities for better opportunities. This creates a significant demand for residential and commercial properties. As per a report by the World Bank, India’s urban household income grew by a significant 12.4% between 2018 and 2019. This rising income level translates into a greater ability to invest in property ownership. A Knight Frank India report reveals that sales of residential properties in India’s top 7 cities witnessed a remarkable 31% year-on-year growth in 2023, showcasing the strong demand for housing units.
2. India’s urbanization rate is currently at 35.2%, and according to the United Nations, it’s projected to reach 45.4% by 2045. This rapid migration to cities creates a substantial demand for housing units. A report by McKinsey Global Institute estimates a housing shortage of over 20 million units in India’s urban areas. This significant gap presents a clear opportunity for investors in residential real estate development, particularly in areas with planned infrastructure projects and upcoming business hubs. Another report by McKinsey Global Institute suggests that by 2030, India will add 404 million urban residents, necessitating substantial housing construction.

Rental Income and Capital Appreciation

1. Real estate offers a dual benefit as rental income provides a steady cash flow, while property values have a historical tendency to appreciate over time. This creates a wealth-building opportunity, offering both a passive income stream and potential capital gains upon resale.
2. The Indian service sector, a major contributor to the GDP, is experiencing rapid growth. This translates into a rising demand for office space, particularly in Grade A office buildings located in central business districts (CBDs) of major cities. A JLL report indicates that office space leasing activity in India witnessed a significant 28% year-on-year growth in Q1 2024.

Government Initiatives and Infrastructure Development

1. The Indian government is actively implementing policies to boost the real estate sector, including affordable housing projects and infrastructure development initiatives. These initiatives improve connectivity, create new economic hubs, and enhance the overall appeal of specific locations, leading to property value appreciation in those areas.
2. According to a report by CBRE, rental yields for prime office space in key Indian cities like Delhi and Mumbai can range from 7% to 8%, offering attractive returns on investment. This for Hyderabad has been even more for the last 5-6 years. With the government providing Housing for free in the rural areas, the prices in urban are getting higher and higher. 

Additional Points to Consider

1. A report by Knight Frank India suggests that residential property prices in India grew by 4.1% year-on-year in December 2023. An article by Live mint highlights the rising demand for luxury real estate, with a projected CAGR (Compound Annual Growth Rate) of over 5% for the segment between 2023 and 2028. This is about 8% for Hyderabad, even more than the likes of Bengaluru and Pune.
2. A study by the National Investment Infrastructure Fund (NIIF) estimates that India’s infrastructure sector requires an investment of USD 1.4 trillion by 2030. This massive investment will create new economic zones and improve living standards in various cities, positively impacting real estate markets.
3. India’s IT and IT-enabled services (ITeS) sector continues to expand, driving demand for office spaces. Cities like Bengaluru, Hyderabad, Pune, and Chennai have emerged as major IT hubs, attracting significant commercial real estate investments.
4. The e-commerce sector in India is growing rapidly, leading to increased demand for warehousing and logistics spaces. The rise of online shopping and the need for efficient supply chains have fuelled investments in industrial real estate.
5. The Reserve Bank of India (RBI) has maintained a low-interest-rate regime to stimulate economic growth. This has led to affordable home loan rates, making property purchases more attractive for buyers and investors. Not only this, many banks and non-banking financial companies (NBFCs) are offering various loan products tailored to meet the needs of real estate investors. Easy access to credit and attractive financing options have facilitated real estate investments.
6. The real estate sector has shown remarkable resilience in recovering from the impact of the COVID-19 pandemic. The demand for residential properties has surged post-pandemic, driven by the need for larger homes and better living conditions.
7. The burgeoning e-commerce industry in India is driving the demand for modern warehousing and logistics facilities. This sector presents a promising opportunity for investors seeking exposure to a high-growth market with potential for capital appreciation. A report by Colliers International suggests that India’s warehousing space is expected to grow at a CAGR of 8-10% by 2025, highlighting the significant potential of this segment.

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