India’s real estate sector to expand to $5.8 trillion by 2047, says Naredco-Knight Frank report; Hyderabad in focus

The report projected the size of India's economy to range between an estimated $33 trillion and $40 trillion by 2047.

ByDeepika Pasham

Published Aug 27, 2023 | 10:05 AMUpdatedAug 27, 2023 | 10:05 AM

The high-end UB City mall in Bengaluru. Malls and high streets are powering real estate growth.

Powered by cities like Hyderabad, Chennai, and Bengaluru, India’s real estate sector is will expand to $5.8 trillion by 2047 from $477 billion in 2022, contributing over 15 percent to the country’s total economic output, a joint report by Knight Frank and National Real Estate Development Council (Naredco) has said.

The more than 12-fold growth would mainly be propelled by the warehousing and residential segments, the India Real Estate: Vision 2047, a joint report by realtors’ body Naredco and real estate consultancy firm Knight Frank released on Saturday, 26 August, said.

“India’s real estate sector is expected to expand to $5.8 trillion or $5,833 billion by 2047. This estimated real estate output value will contribute 15.5 percent to the total economic output in 2047 from an existing share of 7.3 percent,” Naredco-Knight Frank said in a statement.

The report also projected the size of India’s economy to range between an estimated $33 trillion and $40 trillion by 2047.

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Shrinking low-income group

With the change in income profiles, the share of lower-income groups would shrink to nine percent from the current 43 percent by the time India celebrates its 100th year of Independence, the report, released in Hyderabad, said.

The report predicted that a large chunk of the now-low-income group would shift to the lower-middle or upper-middle-income brackets in the next 24 years. Subsequently, the demand for affordable housing would gradually shift towards mid-segment and luxury housing.

While the mid-segment housing market would continue to dominate the demand, there has been a growing requirement for luxury housing.

In 2018, across the top eight cities in India, luxury housing comprised 16 percent of the total sales.

Apart from Hyderabad, Bengaluru and Chennai in the South, the cities are: Kolkata, National Capital Region of Delhi, Ahmedabad, Mumbai, and Pune.

Further, the share of High-Worth Individuals (HNIs) and new ultra-HNIs would likely increase to nine percent from the existing three percent by 2047, generating a significant demand for luxury housing in the country.

In 2022, the share of this segment significantly increased to 27 percent. Going forward, factors such as the growing economy, salary growth from the high-paying services sector, and growth in numbers of HNIs and UHNIs, would continue to raise demand for luxury housing in India.

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The Hyderabad scene

Knight Frank India said the Hyderabad realty sector was continuing to witness investments from the IT, and Banking, Financial Services and Insurance (BFSI) sectors.

Hyderabad continues to see investment from IT and BFSI sectors. Electric vehicles, aerospace engineering verticals, too, are growing,” Samson Arthur Senior Branch Director of Knight Frank, India, told South First,

“Data centre and warehousing for e-commerce are the other sectors that are coming more to this region. Housing is moving upscale in Hyderabad with HNIs preferring larger sizes, high-rises, more amenities, and plush interiors,” he said.

On the price surge in places around Himayat Sagar and Osman Sagar, Arthur added that more projects were likely to come up in the Budvel, Gandipet, and Kokapet areas.

London, UK-headquartered Knight Frank estimated that 69 percent of the working population would be formally employed to support the economic expansion to $36 trillion by 2047.

In terms of market value, the estimated office stock was likely to generate a potential output equivalent to $473 billion in 2047.

The office stock has grown significantly from 278 mn sq ft in 2008 to 898 mn sq ft cumulatively across eight leading cities.

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Warehousing needs

Chairman and Managing Director of Knight Frank India Shishir Baijal said factors such as demographic advantages, improving business and investment sentiments, and government policy push for high-value output sectors such as manufacturing, infrastructure, etc, would support the economic expansion of India.

The report further estimated that the manufacturing sector would contribute 32 percent of the country’s total economic growth. As of 2021, five lakh hectares of land in India has been used for industrial purposes. These comprise 3,989 special economic zones, industrial parks, estates, etc.

An estimated 102 lakh hectares would be required to cater to the demands of the industrial sector in the next 25 years. Earlier, the warehousing sector was largely dominated by local and Grade B developers.

However, the growth in organised retail and warehousing needs of sophisticated sectors such as pharmaceuticals, cold storage, automotive, etc, have expedited the need for quality warehousing structures in India.

Knight Frank estimated that the warehousing market has long been considered an attractive investment opportunity, given the growing needs of a massive consumption market.

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Malls and high streets

In 2022, the top eight cities in India featured 271 operational malls, located mainly in Lokhandwala Market, Colaba Causeway Market, and Lower Parel in Mumbai; Connaught Place, Khan Market, and Lajpat Nagar in Delhi; SG Highway and Chimanial Girdharlal Rao (CG Road), Ahmedabad; Indira Nagar100-feet Road, Jayanagar 4th Block, Koramangala 100-Feet Road and 80-Feet Road, Bengaluru; Gachibowli, Ameerpet, Banjara Hills, and Jubilee Hills, Hyderabad; Mahatma Gandhi Road, Koregaon Park, and Baner Road, Pune; Nungambakkam High Road in Chennai, and DLF Galleria in Gurugram.

After 2018, due to the growing demand for quality malls, Grade A developers continued to expand their footprint, comprising 45 percent of all the existing operational malls across the top eight cities of India.

Besides shopping malls, high streets in India also comprise a significant share of India’s retail real estate landscape. Knight Frank assessed that 30 high streets across the top eight cities accounted for a total retail area of 13.2 mn sq ft of which 5.7 mn sq ft comprised modern retail area.

It also noted that retailers on high streets were as important as shopping malls.