India's Real Estate Sector Poised to Reach $1.5 Trillion by 2034: Report

In a recent report titled 'Indian Real Estate: A Decade from Now,' Knight Frank India, a prominent real estate consultancy, in collaboration with the Confederation of Indian Industry (CII), forecasts that India's real estate sector will surge to an estimated $1.5 trillion by 2034, comprising 10.5% of the nation's total economic output. This projection marks a significant leap from the sector's 2023 market size of approximately $482 billion, where it contributed 7.3% to the overall economic output.

The residential segment is anticipated to take the lead with a valuation of $906 billion, followed by the office sector contributing $125 billion. The demand for land for manufacturing activities is expected to soar, generating an estimated $28 billion in revenue, while warehousing is projected to yield around $8.9 billion.

The report underscores several factors crucial for India's economic growth over the next decade, including a burgeoning young population, the expansion of domestic manufacturing, infrastructural advancements, and urban expansion. Under favorable conditions for these drivers, and assuming a 2% annual depreciation of the Indian currency against the US dollar, India's GDP could potentially reach $10.3 trillion by 2034.

Residential Real Estate Outlook for 2034

India's population is poised to surge to 1.55 billion by 2034, with approximately 42.5% residing in urban areas. To accommodate this urban growth, an additional 78 million housing units will be required between 2024 and 2034. By 2034, a substantial portion of the population is expected to fall within the lower-middle and upper-middle-income brackets, driving demand for affordable housing initially, gradually transitioning towards the mid-segment. Additionally, the rise in High-Net-Worth and Ultra High Net Worth Individuals households is anticipated to boost demand for luxury housing, potentially adding $906 billion to the market over the next decade.

Commercial Real Estate Outlook for 2034

The report highlights a significant expansion in the office space sector, with Tier 2 and Tier 3 cities witnessing rising demand and supply. Factors such as business expansion, infrastructure development, and the rise of the IT and services industry are driving this growth. An estimated 2.7 billion square feet of office space will be required by 2034, generating around $125 billion in revenue. The emergence of Global Capability Centres (GCCs) is expected to further drive this market, with an estimated 2,880 GCCs in India by 2034.

Warehousing and Manufacturing Outlook for 2034

Driven by economic growth and rising income levels, India's warehousing market is projected to experience significant demand, with potential revenue of $8.9 billion by 2034. The manufacturing sector is also expected to expand, requiring an estimated 2 million hectares of industrial land by 2034, generating approximately $28 billion in revenue.

Retail Outlook for 2034

Organized retail consumption in India is expected to increase to 21% of total private consumption by 2034, supporting the entry and expansion of retailers and boosting retail real estate.

Private Equity in Real Estate Outlook for 2034

With India solidifying its position as an attractive investment destination, private equity investments in the real estate sector are expected to rise, reaching $14.9 billion by 2034.

Key Recommendations

The report emphasizes the need to capitalize on India's workforce by enhancing skill development initiatives. It also suggests addressing the housing deficit through holistic policy approaches and promoting the adoption of technology to streamline processes. Furthermore, it advocates for the expansion of sustainable practices in the real estate sector to align with India's climate goals.