INDIA Trends and Developments Contributed by: Vivek Chandy, Archana Tewary, Brijita Prakash and Karthik BM, JSA
Real Estate in India – at an Inflection Point The big bang moment for the real estate sec - tor in India was the issuance of Press Note 2 of 2005 by the Government of India, by which the government opened the sector up for foreign investment. Since then, the sector has been pro - gressively liberalised and is today one of the key contributors to the growth story of India, with a current market size of USD482 billion and con - tributing 7.3% to the total economic output of the country. Indeed, in a country where afford - able housing projects share space with some of the most expensive luxury developments in the world, the real estate market is fascinating and the potential for further growth is undeniable. The key principles for the sector in India remain that foreign direct investment is not permitted in “real estate business” , ie, speculative invest - ments in real estate projects (such as invest - ments in undeveloped land or fully developed projects) and that foreign investment must not be permitted to interfere with the holding and cultivation of agricultural land. However, over the past two decades, the Government of India has taken several steps to liberalise the sector to the fullest extent possible while preserving these principles across all types of developments (be it residential, commercial, mixed use, industrial, etc). During the course of these past two dec - ades, the real estate market has moved from focusing on a handful of large or metro cities, to tapping into the potential for value appreciation in Tier II and Tier III cities. The development of smart cities and affordable housing by the gov - ernment has bolstered the growth of residential real estate, whereas the development of infra - structure and business hubs across the coun - try have enabled companies in sectors such as logistics and manufacturing to move their activities to Tier II and Tier III cities, or locations
bordering the Tier I cities to make leasing more affordable. Increase in office leasing. With employers increasingly mandating work from office and even hybrid work models reducing, there is a natural increase in demand for office spaces, and commercial leasing saw significant activity. Media reports indicate that the demand for com - mercial real estate saw a significant increase in 2024, and this trend is expected to continue in 2025. The largest market for commercial leasing appears to have been in Bengaluru, as reflected in the fact that some of the largest real estate leasing transactions were reported from Ben - galuru in 2024. This also underscores the high value placed on Bengaluru as a city for compa - nies in certain key sectors such as e-commerce, technology and global data centres. Commercial markets in Mumbai also witnessed several important developments, with the announcement of landmark projects (commer - cial and mixed use). ICRA estimates that the net absorption of commercial office leasing across the top six cities (Bengaluru, Chennai, Delhi- NCR, Hyderabad, Mumbai Metropolitan Region and Pune) in India is likely to increase by 10-11% to 59-60 million square feet in FY2025 and wit - ness a further growth of 3-4% in FY2026. There continues to be a push for high-quality grade A office spaces to be developed across the country, emphasising that the sector is evolv - ing into a more sophisticated industry. Develop - ers are increasingly incorporating eco-friendly designs, energy-efficient systems and sustain - able materials into their projects. Global capability centres and data centres. A key driver of this trend has been the conscious poli - cy-driven focus by state governments to encour -
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