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Published on: Jan. 17, 2024, 11:42 a.m.
Real impetus drives the real estate sector
  • Strong economic fundamentals boost the growth of real estate sector; Photos: Sanjay Borade

By Arbind Gupta. Assistant Editor, Business India

While 2023 was an eventful year for the domestic real estate sector, 2024 is likely to continue this momentum. According to Knight Frank’s latest report, despite the Reserve Bank of India (RBI) implementing a cumulative increase of 250 basis points in policy rates between May 2022 and February 2023 and a steady rise in residential prices across major markets, the demand for residential properties in the country has been growing and reached a 10-year high in terms of annual sales in 2023. 

Annual residential sales saw a rise of 5 per cent y-o-y, with sales of 329,097 units in 2023. Mumbai registered the highest sales of 86,871 units, demonstrating a 2 per cent y-o-y growth.  Kolkata witnessed the highest home sales growth (in terms of percentage) at 16 per cent y-o-y, followed by Ahmedabad at 15 per cent and Pune at 13 per cent y-o-y in 2023.

The renewed demand has led to an accelerated pace in residential development, with both half-yearly and annual volume of units launched reaching their highest levels in a decade. Notably, the launch volumes in 2022 and 2023 have surpassed the sales figures for the corresponding periods. It’s worth highlighting that this has occurred only thrice in the past 10 years. A total of 350,746 units were launched across the eight major markets, registering a rise of 7 per cent y-o-y. 

Mumbai recorded the highest number of residential launches in the country, with supply of 93,051 units during the year. Kolkata witnessed the highest growth (in terms of percentage growth) at 28 per cent, followed by Bengaluru at 18 per cent.  NCR was the only market to record a marginal slowdown in launches.

“Characterised by a shift towards more expensive properties, the residential market continues its onward march to achieve another watershed year in 2023,” remarks Shishir Baijal, chairman & managing director, Knight Frank India, commenting on the residential sector performance for 2023. “No doubt, this growth is led by the strong economic fundamentals of the country that gives buyers financial confidence to make long-term investments. Furthermore, dramatic improvement in home affordability over the last decade has helped home buyers despite a steady rise in prices.  Having said that, we can see some signs of distress in the affordable segment which saw reduced sales volumes,” Baijal adds. 

Housing demand

Adds Anuj Puri, chairman, Anarock group: “The past year has been phenomenal for the Indian housing sector, despite global headwinds, rising domestic property prices and interest rate hikes over the first half of the year. Housing sales in the top seven cities breached the previous high of 2022, with new launches staying in step with the current housing demand.”

On the office market front, leading eight Indian markets of India witnessed a total office transaction of 59.6 million sq ft in 2023, registering a growth of 15 per cent y-o-y. This is historically the second-best year, after the peak level achieved in 2019 of 60.6 million sq ft. While the Indian economy has not been completely insulated from the economic turbulence, timely interventions by the central bank and the government have ensured that inflation has not spiralled out of control and the economy has stayed on the growth path allowing office market to remain buoyant. Occupier sentiments have improved steadily in 2023, with cumulative transaction volumes across the eight markets increasing progressively over the four quarters of the year, says the Knight Frank report.

Despite witnessing a decline of more than 14 per cent y-o-y in office space transactions, owing to slowdown in demand from technology sector and a higher base year volume of 2022, Bengaluru has led the Indian office market with 12.5 million sq ft of transactions in 2023. Registering a growth of 92 per cent y-o-y, Chennai market became the biggest outperformer, with 10.8 million sq ft of office space transactions during the year.

  • Year 2024 promises to be a standout year for the office market

Office completions dropped by 13 per cent y-o-y to 42.9 million sq ft in 2023, as developers were largely focused on residential projects owing to the relatively steeper increase in sales volume and prices. However, Kolkata saw a significant increase of 332 per cent y-o-y in office space completion, followed by Mumbai and Chennai at 52 per cent and 49 per cent, respectively. Also, Bengaluru and Chennai witnessed the highest new office supplies of 13.4 million sq ft and 6.6 million sq ft, respectively, says the Knight Frank report. 

Rents have firmed up across all markets over the course of the year. This is the third half-yearly period when rents have either grown or remained stable across all markets. Despite not having had its best year in terms of transaction volumes, rent growth has been strong in Bengaluru at 7 per cent on account of limited supply for Grade A space. Among the other large markets, rents in Mumbai, NCR and Chennai have grown at 4 per cent, 2 per cent and 6 per cent, respectively.

“The impetus behind India’s recent dominance in office absorption is attributed to its strong economic fundamentals. The forthcoming year is poised for steady expansion, and 2024 promises to be a standout year for the office market, driven by India-facing businesses and Global Capability Centres (GCC). India will continue to play up on its natural advantages which include excellent real estate, highly competitive rents, very strong talent pool and a consistently growing economy, making it a robust end-user market. These factors will catalyse for advancing further demand for office space. The surge in flexible workspaces will play a pivotal role in fostering growth-oriented businesses in India. With these factors in play, we anticipate the office market to reach new peaks in 2024,” says Baijal.

Growth of GCC sector

GCCs recorded an increase of 58 per cent in transaction volumes, from 13.2 million sq ft in 2022 to 20.8 million sq ft in 2023. Chennai witnessed the highest GCC focussed transactions at 6 million sq ft, followed by Hyderabad at 4.1 million sq ft. The increasing confidence in the country’s economic stability has substantially increased corporate investments in setting up GCCs in India and this is reflected in the growing share of GCCs in the total transacted area. Their share has grown substantially from 25 per cent in 2022 to 35 per cent in 2023. This makes the GCC category as the only one to grow in terms of market share among the four end-use categories, as per the Knight Frank report. 

India’s office absorption has undergone a shift in characteristics, transitioning from being predominantly led by third-party IT services to being increasingly favoured by GCC in recent years. The primary catalyst for this transformation lies in the evolving attitude of global corporations, which now lean towards owning their resources while expressing a favorable inclination towards India for establishing such setups. India boasts exceptional quality in real estate, competitive rental rates, an extraordinary talent pool, and a consistently growing economy, making it a robust end-user market for numerous companies.

  • Data centres, life sciences and shared spaces will witness increased traction in 2024

Though GCC recorded a significant mark-up in its share, India-facing business continued to anchor the office market with 21.9 million sq ft of office market transactions in 2023. Mumbai led the annual office transactions of India-facing business at 5.8 million sq ft, closely followed by National Capital Region at 5.5 million sq ft. 

The need for flexibility of tenure is not as intensely felt today, compared to a year ago when flex spaces accounted for 19 per cent of the total transacted volumes relative to the 17 per cent in 2023. End use categories of flex and third-party transacted volumes of 10.4 million sq ft and 6.5 million sq ft in 2023, says the Knight Frank report.

“In 2023, the global economy, while grappling with monetary tightening and geopolitical challenges, fared better than expected,” argues Anshuman Magazine, chairman & CEO, India, South-East Asia, the Middle East & Africa, CBRE. “Most major economies managed to avoid a recession, while the Indian economy continued demonstrating resilience in the year gone by.” The Indian economy is anticipated to exhibit similar resilience in 2024 as well, led by strong domestic growth and sustained capital expenditure.

The office sector also performed better than expected, with many occupiers finalising deals in the latter half of the year. Driven by steady momentum in enquiries, this demand is likely to remain largely stable during H1 2024. However, “we expect demand to pick up momentum during H2 2024, led by clearer visibility of the global macroeconomic situation and an uptick in the global information technology (IT) services sector,” contends Magazine.

Alternate asset classes will gain

“However, 2024 is likely to be a year of redemption where real estate will reshape, restructure and realign on a stronger domestic footing. Although office assets will continue to constitute the bulk of investment inflows in 2024, alternate asset classes like data centres, life sciences and shared spaces will witness increased traction. Additionally, all throughout 2024 and beyond, sustainable elements and digital touchpoints will percolate across all real estate verticals,” affirms Badal Yagnik, CEO, Colliers India.

“Although the momentum in residential real estate is likely to continue into 2024, we might witness the base effect coming into play and thus growth in sales, launches and prices will remain moderate. With adequate inventory and uptick in ready to occupy property supply, the residential market is likely to be evenly balanced between homebuyers and developers. Developers with a track record of timely execution of projects will continue to see good traction in the market,” Yagnik adds.

According to Niranjan Hiranandani, chairman, NAREDCO National, “Real estate in India has grown steadily over the last few years, driven by factors such as rapid urbanisation, infrastructure improvements, favourable demographics, and government policies geared towards growth. With economic growth projected at 7 per cent, India has a solid foundation for the upcoming fiscal year. A dynamic market shift and buoyant consumer demand characterise the current Indian real estate market.

Several compelling factors combine to make the Indian real estate sector a standout. These factors include rapid urbanisation, political stability, infrastructure development, buoyant capital markets, institutional investment, favorable demographics and rising incomes. A comprehensive landscape of growth, resilience and innovation in the Indian real estate sector generates an overall sense of optimism for 2024-25.

  • A comprehensive landscape of growth, resilience and innovation in the Indian real estate sector generates an overall sense of optimism for 2024-25

“The new year is well-poised to take the sector forward,” informs Ankita Sood, head, research,, & “We expect good momentum in both property buying and renting, as our IRIS index, which tracks upcoming demand, estimates northbound movement. Property prices have surged 15-20 per cent from pre-Covid levels and monthly rents have seen a spike of 25-50 per cent in key areas of cities, driven by the service industry. We feel the growth for 2024 will not just be limited to the metros, but be driven by the Tier II cities as newfound economic and realty epicentres.”

“Looking ahead, the dynamic landscape promises diverse opportunities beyond conventional realms. The year holds potential for those exploring emerging locations, innovative projects, and untapped geographical landscapes within the real estate sector. In this transformative journey, the Indian real estate sector stands as a beacon of progress, reflecting the nation’s resilience. As we are into the new year, may aspirational, luxurious living and premium lifestyles become a tangible reality for an even greater number of aspiring homebuyer,” hopes Venkatesh Gopalakrishnan, MD & CEO, Shapoorji Pallonji Real Estate.

“Closing the chapter on 2023, the Indian residential real estate sector showcased strong performance despite rising interest rates and prices. Residential demand continued to be driven by end-users. Premiumisation was also a theme this year, with homebuyers seeking spacious homes. As we step into 2024, the real estate sector in India is poised to continue the journey towards innovation, adaptability, and growth. Projections indicate that this trend will persist into 2024, given potential factors such as an interest rate cut, stable property prices, salary hikes, and improved job opportunities – all seen as catalysts for sustaining demand,” views Amit Kumar Sinha, MD & CEO, Mahindra Lifespace Developers.

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