India’s Ascent: From Emerging Market to Global Economic Powerhouse
India is on a remarkable trajectory towards becoming a USD 30 trillion behemoth by 2047. This ambitious vision is a testament to the country's potential and also a reflection of its strategic planning and robust government policy framework. The path to this goal involves leveraging demographic dividends, boosting infrastructure, increasing foreign investments, and ensuring inclusive growth.
India’s vision to become a global economic powerhouse by 2047, its 100th year of independence, is driven by a comprehensive roadmap laid out by the government. The NITI Aayog's vision document outlines the necessity for an average annual economic growth rate of 8-9% over the next 2 decades. This requires significant enhancements in productivity, technological advancements, and increased participation in the global economy.
India's real estate market is closely tied to its economic policies and political stability. The sector relies on sustained infrastructure development and foreign investment inflows, both of which could be impacted by any shifts in the political landscape. With the political dynamics of a coalition government unfolding, policy implementation will be interesting to watch including real estate growth projections. However, the long-term vision remains focused on growth, with ongoing reforms and infrastructure projects continuing to lay the groundwork for future expansion.
The government's ability to enact and sustain policies is crucial. While a majority mandate typically allows for the implementation of long-term economic strategies without the disruptions of political instability, the current scenario necessitates coalition-building and some readjusting to satisfy all partners. The political situation, while prima facie got an initial knee-jerk reaction from the public equity markets, however as the dust settles providing visibility on governance and policy continuity from hereon, investor confidence driven by India’s economic growth trajectory will continue on course.
The real estate sector is a cornerstone of India’s economic growth strategy. It is the second-largest employment generator after agriculture and has a multiplier effect on the economy. The sector and across asset classes are expected to contribute significantly to achieving the USD 30 trillion target.
The residential real estate market in India is experiencing robust growth, fueled by urbanization and rising income levels. Recent trends indicate a shift towardsstrong propensity for home ownership including a shift towards luxury and larger unit sizes. The growth engine is revving across both volume and price with both demonstrating strong mid teens plus growth percentages. These trends also demonstrate a clear preference for quality developers with good execution track record and pan India presence. The runway for quality developers appears robust with demand expected to continue strongly.
India’s retail real estate market is also set for a significant expansion. The top seven Indian cities—Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Pune, Kolkata, and Chennai—are expected to collectively add over 40-45 million sq ft of retail space over the next 4-5 years to ride on the India consumption wave 15-20% higher than the absorption over the entire last decade. Integration of retail as part of mixed-use developments will aid in delivering experiential and engaging retail experiences and this larger retail ecosystem.
In the office space sector, significant transformations are underway. The post-pandemic hybrid work model has influenced demand patterns, with a rising interest in flexible workspaces. Major cities like Bengaluru, Hyderabad, and Pune are witnessing substantial office space absorption, driven by the IT and ITeS sectors. Furthermore, the growth of start-ups and multinational companies establishing offices in India is fueling this demand.
Global Capability Centers (GCCs) are also expanding rapidly in India. The country has become a preferred destination for setting up GCCs due to its skilled workforce and cost advantages. Now, companies are not only looking to India for cost benefits but also for driving innovation. Cities like Bengaluru, Chennai, and Hyderabad are leading in GCC development, significantly contributing to real estate demand in these regions.
All in all, India's real estate market is undergoing rapid transformation, driven by urbanization, increasing income levels, and government initiatives such as the Smart Cities Mission and the Pradhan Mantri Awas Yojana (Housing for All). The development of infrastructure, including roads, highways, and metro projects, is not only improving connectivity but also enhancing the value of real estate across the country.
While the vision is ambitious, it is not without challenges. The country needs to address issues such as infrastructure deficits, regulatory bottlenecks, and the need for fiscal consolidation. The banking sector's health, characterized by non-performing assets, also poses a risk to sustained economic growth.
However, the opportunities are immense. India’s young workforce is a significant asset. Investing in education and skill development is crucial to harness this demographic dividend. Additionally, promoting women’s participation in the workforce and ensuring wage parity can contribute to more inclusive growth.
Looking ahead, RMZ is poised to play a significant role in India’s economic narrative. Our future projects include expansive mixed-use developments, which integrate residential, commercial, and recreational spaces, promoting a holistic living experience. RMZ’s vision is to create urban ecosystems that are not only economically viable but also socially and environmentally sustainable.
Arshdeep Sethi- MRICS , President, RMZ Real Estate.
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