India real estate market report

While 2022 was the year of consolidation, 2023 is testament to the longevity and tailwinds in India’s growth story. The sustained growth in the Indian real estate sector across all the asset classes is reflected by the strong performance of demand and supply indicators in 2023.The office, residential, retail, data centres and warehousing segments have seen sustained performance in 2023 despite the global sluggishness and is poised to achieve next level of growth in 2024.

India truly shone as the office to the world, with its tech ecosystem, talent pool and cost advantages strengthening it as the global GCC hub. Global companies continued to repose their faith in the country’s established credentials as an innovation geography. Leasing activity is on track as first time since 2019 net absorption is expected to exceed the three-year pre-pandemic average. It is expected to be at 37-39 million sq ft by end of 2023. This indicates a strong last quarter of 2023. Office supply is anticipated to strengthen and reach approximately 47-49 mn sq ft by the end of the year.

The residential sector continued to break new records through the year and is expected to register highest home sales since 2008 at~260,000 units. The retail sector remains extremely robust with prominent mall completions in cities and net absorption expected to reach 4.8 mn sqft by end of 2023. The warehousing/industrial sector is primed for another bumper year with net absorption expectations for 2023 in line with 2022 numbers. Data centre industry is poised for a quantum leap driven by Generative AI. Technology and large joint ventures will propel India DC market on a new growth trajectory.

The outlook remains bright for the real estate sector backed by strong economic growth and adaptability shown by the real estate developers to launch new products as per occupiers' requirements. India’s real estate sector is on an elevated growth path where the focus will be on creating an innovative built environment, greater role of technology and adherence to the ESG guidelines. 2024 will see implementation of best practices, newer formats, and greater influx of institutional investments.

Outlook 2024:

• GCCs will be the key to increasing occupier demand and to help push absorption near previous peak levels. India’ talent pool and RE costs create a perfect storm for innovation and R&D Centres of Excellence being set up in India at an accelerated pace. They occupy around 35% current Grade A stock and number around 1850+.

• With a strong supply pipeline of 58-60 mn sq ft lined up in 2024, headline vacancy is likely to remain sticky at 16-17%.

• Office net absorption for 2024 is expected to be up 20-22% y-o-y to touch 45-47 mn sqft.

• Institutional, quality assets will remain first choice of occupiers with ‘flight to quality’ a running thread in space requirements.

• Flex segment and dispersed Tier 1/Tier 2 strategy to drive space needs in 2024.

• Residential sales in 2024 to exceed by 10-15% to be record ~300,000 units.

• Sales to be backed by quality launches by the developers.

• The launches of new residential projects are expected to strengthen further through new land acquisitions in strategic locations and growth corridors.

• In 2024, around 280,000-290,000 residential units are likely to be launched across the top seven cities of India.

• The physical retail market has an expected supply pipeline of ~23.82 mn sq ft of retail developments between 2024 and 2026.

• Retail sector likely to record a robust net absorption at 6.3 mn sqft in 2024.

• The warehousing stock in India is projected to reach 415 mn sq ft by 2024.

• Vacancy in Grade A space is expected to remain low, hovering around 5% in 2024.

• Multiple sectors including 3PL, e-commerce, and retail are expanding their presence beyond Tier 1 cities, venturing into Tier 2 & 3 cities, driving the development of Grade A space in these emerging markets.

• Urban Logistics is gaining importance with rising in-city warehouse space to enable quicker deliveries to consumers.

• 5G subscriptions are expected to reach 700 million by the end of 2028 leading to 16% CAGR growth of data usage by smartphone from 26 GB in 2022 to 62 GB per month in 2028.

• Generative AI and machine learning are expected to drive substantial demand for high computing and storage servers, leading to new wave of growth for high-end data centres on a global scale.

• Significant partnerships for AI/ML development in India and the entry of a large telecom player via a joint venture signify high-growth phase for Indian DC industry