Indian realty to become trillion dollar industry by 2030: KPMG

The Indian real estate sector will be a $1 trillion (72 lakh crore) industry by 2030, becoming the third largest globally, propelled by affordable housing, co-working spaces and a transparent regulatory environment, a KPMG report said today.

From $120 billion in 2017, the sector will grow to $ 650 billion by 2025. During this period, the sector’s contribution to GDP will go up from about 7 per cent to 13 per cent, said the report released at NAREDCO and APREA’s Real Estate & Infrastructure Investors’ Summit in Mumbai today.

Private equity investments in Indian real estate have also improved 15 per cent year-on-year in January-March 2018, reaching $ 3 billion. “Average deal size in 2018 has tripled to $157 million from $47 million in 2016, overall, Mumbai has been the preferred destination attracting 53 per cent ($2 billion) of total investments,” said Neeraj Bansal, Partner and Head, Building, Construction and Real Estate, KPMG India, said.

“With the current government’s renewed focus on affordable housing, game changing regulatory reforms and infrastructure status to warehousing, business sentiment has been positive,” Neeraj Bansal said.

Overall, strong economic ground rules, proactive reforms and the usage of technology will continue to boost the sector. “Changes in GST along with rapid and consistent implementation of RERA across states will enhance consumer confidence and help pick up the residential segment as 20 per cent of states and union territories are yet to notify rules, over 40 per cent have neither a web portal nor an Appellate Tribunal,” Bansal said.

While the government has been actively promoting digitisation and enabling ICT-based infrastructure solutions through initiatives like Smart City Mission and India Chain programme , there is a growing need for public-private-partnerships and private ventures for improving efficiencies in the real estate ecosystem, the reported noted.

A number of other asset classes—such as co-working space, affordable housing, rental housing and warehousing realty—have mushroomed in the country, and are fast gaining traction.

The growth of co-working spaces is driven by entrepreneurs who want to explore flexible, low cost solutions breaking the stereotypical leasing arrangement, and by the warehousing industry to cater to the expanding e-commerce, retail, FMCG and automotive sectors.

“Increased interest in affordable housing is expected due to the Central Government’s policy push, innovative technology as well as increased participation from the private sector. Easier availability of land in the extended suburban sub-markets, along with improved infrastructure connectivity, is also helping drive the real estate sector,” the report added.

The sector is the third largest employer after agriculture and manufacturing in the country and employs over 50 million people presently. As per the National Skill Development Council, real estate and construction is expected to necessitate a demand for over 66 million people by 2022.

The highlights from the report are as follows:

• The real estate sector is estimated to grow to $ 650 billion by 2025 and surpass $ 850 billion by 2028. The sector will be driven by emerging asset classes such as affordable housing and co-working spaces.
• $ 4 billion has been invested by institutional investors in 2018 so far; average deal size crossed $ 150 million mark, the highest in the last five years.
• Institutional financing is becoming a prominent financing medium with the commercial sector attracting over 60 per cent of investments.
• Close to one-third of the real estate leaders reported that their company experienced a cybersecurity issue over the last 24 months, indicating that cybersecurity, blockchain, IoT, AI and data analytics can be key enablers for the sector in the mid-term.
• Pre-GST implementation CAGR (2014–16) of 15 per cent has increased to an expected post-GST implementation CAGR (2017–21) of 21 per cent for Grade A and B warehouse stock projections in the top eight cities in India