Indian immovable emerges as a preferred investment avenue amid market volatility
Apart from factors such as rapid urbanization and increasing population which are contributing to increased demand for affordable housing in major Indian cities, investors are also turning their attention to residential and commercial real estate. As stock markets stagnate amid mounting inflationary pressures, real estate investments are rising due to attractive rental yields and the potential for further price appreciation.
This is despite property prices already appreciating between 10-30% across India in 2022, underscoring India’s growth story that is attracting both domestic and international capital interest. -risk (VC) in all segments of the Indian real estate sector. Indeed, according to a recent CII survey for the first half of 2022, 59% of respondents are strongly inclined to invest in real estate, compared to only 28% who continue to prefer investing in Indian stock markets. We see this trend only getting stronger as
its status as the fastest growing major economy in the world.
Increase in per capita income and development of social infrastructure in Tier II and III cities.
Contrary to the popular perception that the growth of the real estate sector will be concentrated in the metropolises, investments are becoming more widespread as the Indian government pursues its objective of infrastructure development. As capital inflows into retail and office space grew by 53% in the first three quarters of 2022, institutional investors are actively investing in green, ready-to-use Tier II and Tier III cities with an eye on the future.
This trend is supported by the fact that per capita incomes in cities like Goa and Sikkim surpassed those seen in the country’s capital, Delhi, for the financial year 2021-22. As more and more professionals and even experts return to their hometowns due to a permanent shift towards hybrid working, cities like Kochi, Chandigarh, Jaipur and Varanasi, among others, will see an increasing demand for accommodation smart and commercial real estate units. With the Union government stepping up infrastructure construction even in the rural hinterlands of India, it is widely believed that these upcoming urban centers will experience better price appreciation than other major housing markets. of the country today.
Strong demand for ultra-luxury units and resort residences will strengthen.
With rising household incomes and an increasing number of Indians among the world’s wealthiest citizens, the ultra-luxury residential real estate segment is booming, with demand often outstripping supply. Even in markets like Mumbai, Delhi, Bengaluru and Kolkata that traditionally have a healthy pipeline of such units, consumers are increasingly opting for projects that offer amenities that are on par with those offered by international developers. This shift in consumer habits has prompted Indian property developers to launch new luxury housing projects that can meet the needs of this burgeoning class of domestic investors.
Additionally, 2022 has been the year of vacation homes and development projects, as upper-middle-class buyers venture to invest in second homes tucked away from the hustle and bustle of city centers. . Inspired by this new trend, leading Indian developers are investing heavily in developing gated projects in upcoming destinations like Sarjapur, Palghar and even cities surrounding major metros, to meet the proliferating demand for higher quality life. Both of these segments should continue to attract domestic consumers and investors, which bodes well for further capital appreciation. Even though India’s real estate sector is acting as an important driver of India’s holistic development, the developer community will need to step up its efforts to improve construction and design standards from those offered in developed countries. This will compel them to raise funds through additional avenues such as Real Estate Investment Trusts (REITs) and attract more Indians to actively invest in the country’s real estate economy. With REITs offering proportionate ownership of income-generating real estate assets, more Indian developers will need to set up their own REITs, educate investors on their potential for long-term value creation, and seek more investment through this channel. Not only will this attract more foreign investment, but it will also leverage the country’s large population to establish a sustainable funding model that will drive India’s real estate sector to new heights in 2023.
(The author, CR Shivakumar is Chairman (Elected) of NAR India.)
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