'Ind's real estate sec shifting towards sustainability'

India’s real estate sector is witnessing a significant shift towards sustainability, with 82% of new Grade A office supply as of September 2023 being green certified, according to a joint report by NAREDCO and KPMG.

India’s real estate sector is poised for a compounded annual growth rate (CAGR) of 18.7% from 2020 to 2030. The trajectory, moving from USD180 billion in 2020 to a projected market size of USD1 trillion by 2030, is fueled by government initiatives, technological integration, sustainability measures and increased investments.

“Envisaged at USD 1,000 billion by 2030, our sector fuels economic growth. Despite challenges, we are committed to infrastructure development. In a dynamic landscape, increased investments and global players signal positive growth,” said G Hari Babu, National President of NAREDCO.

Sustainability is influencing green construction practices and energy-efficient designs, while technology is revolutionising aspects such as smart homes and data-driven insights. These trends are enabling developers to create more efficient and cost-effective building designs, while also providing buyers with a more immersive and interactive experience.

The implementation of affordable housing schemes and investor-friendly policies has fueled growth in the housing market, while the emergence of flexible workspaces reflects the evolving requirements of modern businesses. However, the sector does face certain challenges, including the need to attract and retain investors, secure adequate funding, develop robust infrastructure and address the skill gap.

“The real estate sector currently contributes 7.3 per cent to our GDP and is projected to become a trillion-dollar market by 2030. This growth will be fueled by integrating technology across the value chain, with total investments collected by proptech startups worth USD2.4 billion between January 2021 and March 2023,” said Neeraj Bansal, Partner – Risk Advisory & Co-Head and COO – India Global, KPMG in India.

According to the High-Powered Expert Committee (HPEC), investment in urban infrastructure is projected to increase from 0.7 per cent of GDP in 2011-12 to 1.1 per cent by 2031-32. The sector has witnessed significant private equity (PE) investments in recent years, driven by attractive returns. Investments are expected to reach USD59.7 billion by 2047.

The sector’s investment potential is promising due to increased government support, sustainability and the integration of advanced technologies. Changing business dynamics are also creating new opportunities in the sector, which may attract further investments.

India’s real estate sector is witnessing the rise of Tier II and III cities, such as Surat, Bhubaneshwar, Coimbatore, Vadodara, Indore, Chandigarh, Kochi and Visakhapatnam, as significant contributors. These cities have demonstrated remarkable economic growth, improved connectivity and enhancement in infrastructure.

Renowned for their attractive investment prospects, Tier II and III cities are attracting attention due to their abundant talent pool and affordability, making them appealing to both startups and established corporations, as well as industrial entities.

“Areas such as the fractional ownership market and flexible office space are expected to surge by 2025, with USD8.9 billion and about 80 million sq. ft. respectively. The sector growth is expected to remain high over the next two decades, with PE investments to reach USD59.7 billion by 2047,” Bansal said.

The Indian real estate sector has witnessed a surge in proptech startups, focusing on innovative solutions, such as AI-driven analytics, blockchain-based transaction platforms and others. Increasing interest from venture capital firms in proptech startups also indicates growing confidence in the potential of technology integration in the sector.

Cities such as Bengaluru and Hyderabad have become hubs for proptech innovation, hosting a burgeoning community of startups and technology firms that are revolutionising the real estate landscape.

The industry is increasingly adopting renewable energy sources, particularly solar power, in alignment with India’s ambitious goals for a cleaner and more sustainable energy mix. Construction and maintenance practices now integrate circular economy principles, promoting the reuse and recycling of materials.

Sustainability measures are implemented throughout the entire value chain, bolstered by government initiatives such as the Green Rating for Integrated Habitat Assessment (GRIHA) and tax incentives that encourage developers to embrace sustainable design.

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Roy Walsh

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