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Real estate in India set to bounce back stronger in FY 23

Strong and positive momentums are expected to continue prevailing in Indian real estate in FY 23, backed by the solid structural foundation, gain in demand, and lowered home loan rates. By all means, FY 23 will be the fiscal year the industry has been hoping for long. The upswing in the market will also stem from a favorable economic outlook. Most of the rating agencies have estimated the growth of India in the comfortable range of 8-9%. The surge in commercial activities alongside a rise in the job market and income levels will naturally translate into increased housing demand.

Market bounce back is also the progression of the gradual recovery observed in the past 6-9 months. After softened demand due to the pandemic, the real estate market has been on an upswing since the second half of the previous year. The iterations of repo and reverse rate cuts by the government resulted in liquidity injection, thereby helping in accelerated growth.

The developer fraternity also played its part by introducing a host of attractive schemes, luring the fence-sitters, and giving the market a positive push.

In FY 23, the growth juggernaut will continue. Interestingly real estate in Tier 2 and 3 markets will also climb fast. Sustained infrastructure investments, increased connectivity, and better job opportunities will be fuelling real estate in smaller cities and towns in India. Already metro and suburban transit systems are taking shape in cities such as Lucknow, Kanpur, Agra, Patna, Cochin, etc, which will boost real estate demand. Under UDAN new airports are built, which will foster regional economic growth and help the realty sector considerably.

After taking a backseat over the past 2 years, office leasing will see incremental growth, especially from tech, IT, and retail companies. Already large tech companies have closed big-ticket size office lease deals. More will follow.

E-commerce and 3rd party logistic enterprises will continue to pour money into warehousing, making it one of the fastest-growing categories in commercial real estate. Investments in data centers will also soar. Big tech giants such as Google and Amazon are racking up investments in the Indian data center space, lured by its long-term potential.

Pick-Up in Investment Activities

Real estate has been mostly an end-user-driven market over the past 3-4 years. However, the trends are now shifting and it is once again featuring on the investor radar.

Real estate is a smart investment option, provided one has a mid to long-term horizon in mind. Moreover, it has strong aspirational value. Real estate can also give a stream of constant income in the form of monthly rentals. Both large and small investors in India are once again realizing the benefits of investing in real estate, especially at a time when cautious investment remains part of the general lexicon.

Moreover, apart from the stock market, fragility has persisted in other financial assets, which makes real estate a viable alternative. For investors, who have a long haul and are not looking out for quick returns, real estate will be an exciting option to explore in FY 23.

(By Annuj Goel, MD, Goel Ganga Developments)

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