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Indian Realty Beams Optimism

Real estate players reflect on how the policies have led to growth in the sector

The UAE-India relationship displays a strong diplomatic bond offering the large Indian expat community a peaceful environment to study, work and live in the UAE. Many build homes in India to lease and create long-term assets in case if they choose to move back or earn through realty investments.

As India celebrates its Independence Day on August 15, the real estate players reflect on how the country and its policies have led to optimism in the ever-growing sector. Improved income levels, higher aspirations for better living, and a realisation of the importance of owning a home have all contributed to the bullish phase in the housing market. The trend is also supported by rapid infrastructure development and supportive government policies, which have given a significant thrust to the sector.

The premium and luxury housing segment is most preferred by NRIs while investing in property here. The share of NRI investment pre-Covid period was just 10 per cent. It has almost doubled to 20 per cent post Covid. The depreciation of the Indian Rupee against the US Dollar has made it more attractive for NRI investments in India.

This investment helps earn attractive returns, property ownership, and plans to live in it too. The US, by far, is the biggest market, followed by the Middle East and Southeast Asia. Mumbai, Delhi-NCR, and Bengaluru are the most preferred cities for NRI investments due to the availability of premium, luxury, and uber-luxury properties.

Vikas Jain, CEO, Labdhi Lifestyle, said: “Mumbai is seeing a major shift in the real estate ecosystem. Due to scarcity of land, redevelopment of stalled projects and old, dilapidated buildings along with slum redevelopment is now a major development pathway that many developers are adopting."

Redevelopment and transformation

For instance, Dharavi in Mumbai, considered the largest slum in the world, will soon be redeveloped. The redevelopment of Dharavi will not only improve conditions for residents living there but will transform the neighboring areas as well. Due to this newly acquired status, areas bordering Dharavi, like Bandra and Sion, will soon be called New Dharavi. Relatively low property prices will now command a premium. The successful transformation of Dharavi will be a case study for other areas of Mumbai where it can be replicated. This redevelopment and transformation process is giving a new thrust and pushing the growth of the real estate sector in Mumbai to a new high.

The Indian government has been very supportive, bringing in a slew of constructive policy measures that have boosted the overall growth of real estate in India. In addition, major ongoing infrastructure projects have improved connectivity between cities and rural areas, giving a significant thrust to the housing sector in the country.

Vivek Mohanani, Managing Director and CEO at Ekta World, said: “We are also seeing a significant shift in home buyer preference towards luxury housing projects. Home buyers from the mid-segment aspire to upgrade to the premium housing segment, and those in the premium segment further aspire to upgrade to a more luxurious lifestyle.”

New expressways and highways are being constructed nationwide, improving connectivity and significantly reducing travel time for commuters traveling between cities. On a micro level, several infra projects are undertaken in various metro cities.

For instance, in the Mumbai and MMR region, we expect exponential growth in the real estate sector in the next six months to one year. This is against the back of various mega infrastructure projects that are ongoing and are likely to be completed soon. The Coastal Road project, the Mumbai Trans Harbor Link (MTHL), along with newly operational metro lines, is creating a huge demand for housing in these areas of Mumbai, informed Mohanani.

Real estate investment is preferred as rental income — usually between two per cent and 3 per cent — has rocketed up to five per cent. Most luxury projects in Mumbai are being designed and built, keeping the NRI buyers in mind.

The last two years have seen strong capital appreciation in several important areas of major cities, which has boosted NRI's interest in buying residential property in India. The momentum will likely last the rest of the year and beyond.

Prashant Khandelwal, CEO at Agami Realty, said: “The realisation of the importance of owning a home amongst homebuyers, coupled with the government's favorable initiatives for affordable housing, has led to significant growth in the housing sector. As individuals understand the enduring benefits of property ownership versus renting, a consistent and sustainable growth pattern has emerged in the housing market.”

According to a recent industry research report, housing sales in India's top 7 cities peaked in the second quarter of 2023, with over 115,000 units sold. The mid-segment housing, priced between Rs4 million and Rs8 million, continued to dominate the market, capturing a significant 31 per cent share of the new supply.

The premium segment Rs8 million-Rs15 million and the luxury segment (above Rs15 million) followed with shares of 27 per cent and 23 per cent, respectively.

“The robust demand for housing in the region can be attributed to the significant ongoing infrastructure projects, the requirement for high-quality residences, and the surge in redevelopment activities throughout the MMR area. And with the onset of the festive season, the growth will continue to sustain in these markets in the next two quarters,” said Khandelwal.

Supported by favourable policies implemented by Indian regulatory authorities, investments from NRIs in the country have shown remarkable growth in recent years. NRI investments have surged by 33 per cent, with predominant contributions coming from five countries: The US, UK, UAE, Australia, and Singapore.

In response to the Indian government's enhanced receptiveness to foreign investors and implementation of various regulations and directives by entities like RBI and SEBI to facilitate Foreign Direct Investments (FDI), there has been a notable shift in investment focus among NRIs towards India. Furthermore, the real estate sector's consolidation has effectively eliminated underperforming developers. This phenomenon has significantly improved the decision-making process for NRI investors, presenting them with a more favorable selection of developers. This, in turn, has bolstered credibility and trust, leading to a surge in NRIs displaying vigorous interest in aggressive investments within the Indian real estate sector.

Despite rising housing prices due to increased raw material costs and sustained demand, the strong sales momentum is projected to persist, given consumer interest in purchasing larger, better-equipped homes, particularly in the post-pandemic era. The rise in home loan interest rates didn't dampen demand, as sales continued their upward trend. With developers concentrating on providing appropriate housing at competitive prices and strategic locations, the residential real estate market is anticipated to remain promising throughout 2023.

The proportion of Non-Resident Indians (NRIs) participating in premium and luxury housing has more than doubled to reach 20 per cent, according to industry experts. Prior to the pandemic, NRIs contributed to less than 10 per cent of these sales.

Pritam Chivukula – Vice President, CREDAI-MCHI and co-founder and director at Tridhaatu Realty, said: “The anticipated performance of the real estate sector in the next two quarters, the outlook remains promising. The growth momentum is expected to continue as it's not just confined to one or two markets; rather, it's being witnessed across top-tier markets throughout the country. This synchronised growth signifies a broader, more sustainable trend than a short-term anomaly.”

The Indian real estate sector is poised for continued growth and excitement throughout the calendar year of 2023. The next nine months hold immense promise, with expectations of a substantial increase in total sales across various segments. “Projections indicate a remarkable 10 to 15 per cent surge in sales, spanning the entirety of the market. In the next quarters of 2023, the property market will see robust growth with renewed interest among NRIs and millennials to invest in real estate,” said Chivukula.