Indian Realty Market To Touch $1 Trillion By 2030: Survey

India’s real estate is set to grow bigger, the recent slowdown in the sector notwithstanding, if the findings of a report are to be believed. According to a report by KPMG, the Indian real estate market is expected to touch $1 trillion by 2030, becoming the third-largest globally. The KPMG report, which was prepared in association with developers’ body Naredco and the Asia Pacific Real Estate Association, says that the sector is estimated to grow to $650 billion by 2025 and surpass $850 billion by 2028 to touch $1 trillion by 2030. The report also notes that India has consistently improved its ranking in global real estate since 2014, boosting investors’ confidence.

Rising affordability

This growth, the report says, is driven by emerging asset classes such as affordable housing and co-working spaces.

"Indian realty sector has been struggling with unsold inventory, reducing buyers' confidence, delays in projects, and negative cash flows for quite some time. However, a number of growth-promoting regulatory developments and initiatives announced over the last two years, are paving the way for strong sector growth in the future," the report said.

The outside interest

The report also points out that private equity investment in Indian real estate improved 15 per cent year-on-year in January-March 2018, reaching $3 billion. This investment is estimated to grow to $100 billion by 2026, with Tier-I and Tier-II cities benefiting the most in the future.

A total of $4 billion has been invested by institutional investors in 2018 in Indian realty so far, with the average deal size crossing $150-million mark, the highest in the past five years. In 2018, the report said, the average deal size tripled to $157 million compared to $47 million in 2016.

Where from? Where to?

Of the total investments that have come in 2018, nearly 44 per cent are from foreign investors, primarily from the US, Canada and Singapore. Over 90 per cent of the foreign investors have preferred commercial projects across Mumbai, Pune, Bengaluru and Hyderabad, says the report.

Sizing it up

According to the study, the average deal size of foreign investors is $149 million, compared with domestic's $87 million. These domestic investors have equally preferred commercial ($959 million) and residential ($870 million) projects.

"Overall, Mumbai has been the preferred destination, attracting 53 per cent ($2 billion) of total investments. Most of these investments have come from foreign investors. Hyderabad ($793 million) and Bengaluru ($694 million) are preferred destinations of domestic investors," it said.

Growth potential

Recently, Blackstone Group along with its India partner Embassy Group filed an offer document with the Securities and Exchange Board of India (SEBI) to launch the country’s first REIT. The Embassy Office Park REIT could be launched by early next year, media reports said citing official sources.

However, this investment tool remains almost not utilised so far. There is under-utilisation of over Rs 20 billion worth of real estate investment trust (REIT) office stocks, offering a potential rental yield of up to 7.5 per cent, the report points out.

With inputs from Housing News