Making sense of India's real estate boom

Growth drivers in real estate include urbanisation, disposable incomes, and demand for residential, commercial, and logistics spaces, according to a Business Standard-Knight Frank report

India's real estate sector, significantly buoyed by a robust economy, has emerged as a pivotal player in the country's development. With an 18 per cent share in national employment, real estate is the largest employment generator after agriculture. Currently valued at $493 billion, the sector contributes 7.3 per cent to India's gross domestic product (GDP). Our projections indicate this to increase to ₹5.8 trillion by 2047, or 15.5 per cent of India's economic output. Key growth drivers include rising urbanisation, increasing disposable incomes, and heightened demand for residential, commercial, and logistics spaces, besides a growing need for data centres fuelled by advances in the space.

Role of BFSI in real estate growth

The banking, financial services, and insurance (BFSI) sector plays an instrumental role in supporting the expansion of the real estate sector. It facilitates essential financing for home buyers through mortgage products and offers capital to developers via construction finance and lease rent discounting. Also, insurance products, including title and property insurance, help mitigate risks throughout the real estate lifecycle. Mutual funds also enhance access to real estate for retail and institutional investors through real estate investment trusts (Reits) and real estate mutual funds (REMFs).

Trends in residential real estate

The residential real estate market has experienced a post-pandemic resurgence, driven by shifting buyer preferences. Notably, the share of the affordable housing segment-homes priced below ₹50 lakh-has reduced from 54 per cent of total sales in 2018 to 26 per cent in 2024-due to rising prices. Conversely, properties of higher value those priced above 1 crore-have seen a surge from 16 per cent to 43 per cent during the same period, reflecting affluent buyers' preference of premium offerings.