Indian real estate market is expected to become the third largest globally and touch $1 trn by 2030, said a recent survey conducted by KPMG in association with Naredco and APREA.
It charted the growth of the sector, which was estimated to grow to $650bn by 2025, moving on to $850bn by 2028 and then finally touch $1trn by 2030.
Speaking about the findings of the report, Neeraj Bansal partner and head ASEAN corridor of KPMG in India said this growth is driven by emerging asset classes such as affordable housing and co-working spaces.
“As by-products of this growth, the average yearly contribution of 67 per cent to Indian gross domestic product is anticipated to almost double by 2025 while generating employment opportunities for over 66 million people in parallel,” he added.
The report also added that the private equity investments in Indian real estate improved 15% year-on-year in January-March 2018, reaching $3bn. This was reportedly estimated to grow to $100bn by 2026, with tier 1 and 2 cities reaping the most benefits from it in the future.
“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 report further noted that $4bn has been invested by institutional investors in 2018 so far with the average deal size crossing $150mn mark—which was the highest in the last five years. It also stated that the average deal size tripled to $157mn in 2018, which was a sharp rise compared to the $47mn in 2016.
Of the total investments that have come in 2018, nearly 44% are from foreign investors primarily from the US, Canada and Singapore. Also, over 90% of the foreign investments have preferred commercial projects across Mumbai, Pune, Bengaluru and Hyderabad.
According to the study, the average deal size of foreign investors is $149mn compared with domestic’s $87mn. These domestic investors have equally preferred commercial ($ 959mn) and residential ($870 mn) projects.
The report emphasised that overall, Mumbai has been the preferred destination attracting 53% of total investments—which amount to $2bn. Most of these investments have come from foreign investors. It also identified Hyderabad ($ 793mn) and Bengaluru ($694mn) are preferred destinations of domestic investors.
Finally, the report noted that there was an underutilization of over $275mn worth of real estate investment trust (REIT) office stocks, which potentially offered a rental yield of up to 7.5%.