Date: 16/04/2024

Indian real estate expected to reach $1.5 tn by 2034; driving 10.5% of economic output: Report

In its latest report titled ‘Indian Real Estate: A Decade from Now’, Knight Frank India, a leading real estate consultancy in the country, in association with the Confederation of Indian Industry (CII), has projected that the value of the Indian real estate sector will reach an estimated USD 1.5 trillion by 2034, constituting 10.5% of the total economic output by then. In 2023, the sector’s market size was approximately USD 482 billion, contributing 7.3% to the total economic output. The residential market is expected to lead with a value of US$ 906 billion, followed by the office sector contributing US$ 125 billion. Land for manufacturing activities is estimated to generate a value of USD 28 billion, driven by rising demand in India, while warehousing is projected to yield revenues of US$ 8.9 billion.
According to the report, India’s economic growth in the next decade will depend heavily on several factors, including a growing young population, bolstered domestic manufacturing, infrastructure development and urban expansion. Under favourable conditions for these drivers and assuming an annual 2% depreciation of the INR to US$ exchange rate, India’s GDP could potentially reach US$ 10.3 trillion by 2034.
Commercial Real Estate 2034
In 2008, the top 8 cities in India cumulatively accounted for 278 mn sq. ft. office stock; which has now increased to 900+ mn sq. ft. In the last few years, Tier 2 and 3 cities in India have also witnessed a rising demand and supply for office real estate. Factors such as business expansion, low costs, infrastructure development, rise of IT and the services industry, and the availability of talent are some of the key drivers of growth in office stock in Tier 2 and 3 cities. These factors, along with increase in formal workforce in India, will further generate demand for adequate volume of office space in India.
To accommodate the promising economic activity and growth in formal employment, an estimated 2.7 billion (bn) sq. ft. of office space will be required by 2034, i.e. an additional requirement of 1.7 bn sq. ft. in the next decade. As the sector scales up, the potential revenue generation from India’s office real estate is estimated to be US$ 125 bn in 2034.
The report expects Global Capability Centres (GCC) to potentially drive the office market in the next decade. By 2030, there will be an estimated 2,400 GCCs across India as India emerges as a global technology and services hub. Assuming a similar pace of growth, the number of GCCs in India may scale up to 2880 by 2034.
Mr Gulam Zia, Senior Executive Director - Research, Advisory, Infrastructure, and Valuation, Knight Frank India, said “In the coming decade, India’s economic ascent will be marked by an unprecedented surge, with the real estate sector poised to be a cornerstone of this transformative journey. Fuelled by burgeoning wealth, robust consumer spending, infrastructural advancements, entrepreneurial fervour and strategic initiatives like ‘Make in India’, our nation stands on the brink of a profound economic evolution. We anticipate the Indian real estate sector to grow to a USD 1.5 trillion powerhouse by 2034, constituting a remarkable 10.5% of the nation’s economic output. This journey about sustainable progress, anchored in resilience and adaptability, paving the way for a brighter, more prosperous tomorrow”.
Driven by the strong correlation between economic growth and rising income levels, India’s warehousing market is projected to experience a potential demand of 111 mn sq. ft. by 2034, indicating an increase of 42 mn sq. ft. over the next decade. This sector has the potential to generate revenue of US$ 8.9 billion during the upcoming decade.
Volume of warehousing transactions in India
Indian Real Estate: A Decade from Now also estimates the share of India’s manufacturing sector can potentially increase to 21.3% of the GDP. As of 2021, India has allocated 500,000 hectares of land for industrial purposes, encompassing 3,989 special economic zones, industrial parks and estates. To accommodate the anticipated surge in manufacturing activities over the next decade, an estimated 2 million hectares of land will be required for industrial use in India. This substantial increase in demand for industrial land has the potential to generate revenue amounting to USD 28 billion by 2034, said a release.
source: Exim News Service: New Delhi, April 15