Following a spectacular performance in 2023, the Indian housing market continues to thrive, driven by a shifting consumer preference towards homeownership over rental arrangements. As investors seek growth and stability, the Indian real estate market shines bright, setting new benchmarks and surpassing expectations.
In the evolving landscape of investment opportunities, residential real estate in India stands out as one of the most resilient and reliable choices for investors. Despite economic fluctuations and market uncertainties, the sector has demonstrated robust performance, offering stable returns and long-term value appreciation.
2024 has been promising, and the overall outlook for Indian residential real estate appears increasingly optimistic. Amidst a dynamic investment landscape, the sector has established itself as a bedrock of stability and reliability. Current trends and indicators suggest that residential real estate in India will continue to be a leading asset class, outperforming other investment options and providing a secure haven for investors.
Indian Residential Real Estate: A Rock-Solid Investment
Amidst massive inconsistency in the world’s geopolitics, India’s residential real estate sector has demonstrated exceptional stability. The resilient economy and consistent demand have created a positive outlook for industry stakeholders, positioning the country at the forefront of growth in the sector.
The residential real estate market has been recovering in 2023, significantly contributing to India’s growth story. The industry is strong, with an expected 15-25% increase in new property launches in 2024. Additionally, sales are projected to improve by 10-15%, which is essential for the continued progress of the real estate market. In 2024, residential properties in Mumbai are expected to increase in value by 5-8%, with a substantial rise in the demand for luxury and mid-segment properties.
Government Initiatives and Policy Support
The Indian government has introduced several initiatives to boost the real estate sector, particularly housing. Schemes like the Pradhan Mantri Awas Yojana (PMAY) have given a great impetus to every Indian looking to build or buy their first home. In its first cabinet meeting, the newly formed government decided to assist three crore additional rural and urban households with house construction, addressing the rising housing needs of the increasing number of eligible families. Under the PMAY, a total of 4.21 crore houses have been completed for eligible low-income families over the past 10 years.
A Promising Outlook
The Indian real estate sector attracted investments totalling USD 1.1 billion in Q1 2024, with the residential industry leading the way by securing nearly USD 693 million. This marks the residential sector as the standout performer among various asset classes. The sector’s impressive performance is driven by robust housing demand and a resurgent supply over the past few quarters. Investors are capitalizing on this momentum, leading to the residential segment accounting for over 63% of the total real estate investments in Q1 2024.
Infrastructure Growth Creating New Micro Markets
In a pivotal move towards economic transformation, the Indian government has intensified its focus on infrastructure development, allocating an impressive ₹13.7 lakh crore, equivalent to 4.5% of GDP, for capital expenditure. This unwavering commitment underscores the government’s dedication to building a robust foundation for growth and positions India on the path to becoming a $5 trillion economy.
Snehil Yadav, a luxury real estate influencer says, “A significant portion of this investment is directed towards railways, emphasizing strategic intermodal connectivity, including roads, rails, ports, and airports. The primary goal is to enhance transportation and logistics efficiency, reduce costs, and bolster India’s global competitiveness.”
The synergistic relationship between infrastructure investment and real estate development is well-established. Improvements in roads, public transportation, and amenities transform previously inaccessible areas into attractive prospects for real estate investment. This infrastructure push not only facilitates immediate economic benefits but also sets the stage for sustainable long-term growth, significantly impacting the real estate sector by opening new avenues for development and investment.
For example, the recently launched Atal Setu in Mumbai has created multiple new markets in and around Navi Mumbai, which is great news for the MMR’s real estate industry.
In absolute terms, the investment inflow into the residential market in Q1 2024 is double the quarterly average observed over the past eight quarters, highlighting a significant surge in investor confidence and interest in the residential real estate market. This trend underscores the sector’s critical role in driving overall real estate investment in India. This upswing is supported by a stable economy, favourable interest rates, and a shift in consumer perception, where property ownership is increasingly viewed as a reliable financial safety net.
As the market is poised to grow consistently in 2024, residential properties are witnessing a significant surge in demand. India’s property markets are exhibiting robust growth, characterised by a substantial increase in new launches and a notable rise in sales.
According to CREDAI, sales volume rose by 35% in 2024, with luxury segment sales increasing by 50%. Bolstered by unprecedented sales momentum and a thriving luxury segment, developers are also looking at creating attractive real estate investment options for the investors and the end users, which will drive a steady supply pipeline and solidify major metropolitan cities as key drivers of real estate demand.
The Indian real estate sector, a cornerstone of the economy and a key driver of multiple industries is poised for sustained and robust growth. A confluence of factors, including strong GDP growth, rapid urbanisation, rising incomes, and supportive government initiatives, is fueling a surge in demand for diverse property types.
Thus, real estate investments are expected to grow by 15-20% annually. This perfect storm of positive indicators solidifies real estate as a reliable and attractive asset class for investors, offering a secure and promising future.
Why Indian Real Estate Investment is the Most Profitable Option
Over the years, savvy investors have recognized the immense potential and stability that the Indian real estate market offers. The economy appears to be in good shape, with recent increases in business investment.
Demand for residential real estate has continued due to higher rental yields and increasing property values, which have increased the appeal of investing in real estate properties.
The sector has experienced substantial growth and demand due to factors such as elevated earning potential, optimistic consumers and their evolving lifestyles, and a growing base of these consumers.
The Indian real estate market is thriving and has become a part of many successful investment portfolios because of its high return on investment (ROI) value. As per a report, 77% of the total assets of an average Indian household is real estate. Therefore, if you want to grow your wealth, you too should consider a real estate investment in India.
How Indian Real Estate Can Be a Profitable Investment Option
Safety and Stability
Real estate is a less risky investment option than stock markets and cryptocurrency. In uncertain conditions such as pandemics, inflation woes, and recession, stocks and bitcoin are too volatile investment avenues.
Real estate, on the other hand, has grown steadily over the last few decades. When it comes to real estate, the sector has been witnessing growth in the last few years because of the implementation of RERA, reduced home loan interest rates, etc.
On the other hand, the interest rates on savings accounts in banks are considerably low, especially when compared to the rising inflation.
Investors can park their surplus funds by investing in a property as it faces fewer fluctuations and is not easy to steal.
Long-Term Appreciation
While short-term market fluctuations can occur, property investment in India generally exhibits long-term appreciation. Over an extended period, property values tend to increase, providing investors with a reliable avenue for wealth accumulation. This long-term appreciation contributes to the safety and sustainability of real estate as an investment choice.
Government Initiatives
The Indian Government has rolled out several initiatives to boost the real estate sector, making it more attractive for investors. Schemes such as Pradhan Mantri Awas Yojana (PMAY) and the implementation of Real Estate Regulatory Authority (RERA) have not only increased transparency but also instilled confidence among investors.
Additionally, tax benefits and subsidies offered by the government further sweeten the deal, making real estate investment a compelling option.
Crowdfunding and Real Estate Platforms
The advent of crowdfunding and online real estate platforms has democratized access to Indian real estate investment. Investors can participate in property projects with smaller capital contributions, allowing for greater diversification and access to a broader range of opportunities.
Tax Savings
Home loans contribute to tax savings. First-time homebuyers can save up to ₹1.5 lakhs on the principal amount under Section 80C, and up to ₹2 lakhs on the interest payable under Section 24. These tax savings can help them lower their investment cost and make the investment a lot more affordable.
Tips for Beginners Investing in Indian Real Estate
Research and Due-Diligence
Before diving into real estate and opting for real estate investment returns, conduct thorough research on the market trends, property values, and upcoming developments in the chosen location. This will help in making informed decisions and maximizing the investment.
Diversify Your Portfolio
Consider diversifying the real estate portfolio by investing in different types of properties, such as residential, commercial, or rental properties. Diversification can help manage risk and enhance overall returns.
Long-Term Vision
Real estate investment ROI often yields better returns over the long term. Have a patient and strategic approach, considering the property’s potential for appreciation and rental income in the future.
Stay Informed About Market Trends
Stay updated on market trends, economic indicators, and government policies that may impact the real estate sector. Being informed allows beginners to adapt their investment strategy accordingly.
Evaluate Location Potential
Choose locations with high growth potential. Urbanization, infrastructure development, and proximity to employment hubs can significantly impact the value appreciation of a property.
Network and Seek Professional Advice
Build a network within the real estate industry and seek advice from professionals, such as real estate agents, financial advisors, or legal experts. Their insights can prove invaluable in making sound investment decisions.
Negotiate Effectively
Negotiation skills are essential in real estate transactions. Be prepared to negotiate the best possible terms and prices, ensuring maximum returns on investment.
Plan for Financing
Explore different financing options, such as home loans or real estate investment trusts (REITs). Having a clear financing plan helps beginners manage their budget and make feasible investment choices.
By following these tips, beginners can navigate the complexities of the Indian real estate market and make informed decisions, ensuring a successful and rewarding investment journey.
With a booming population and increasing disposable incomes, the demand for residential and commercial properties is expected to continue growing. Additionally, government initiatives, regulatory reforms, and increased transparency have further boosted investor confidence in the real estate sector.
As per the India Brand Equity Foundation (IBEF) report, the real estate sector is expected to reach a market size of $1 trillion by 2030, contributing 13% of the country’s GDP.
Therefore, real estate investment is the most profitable avenue to create a passive income and grow your wealth.