In FY 2023, India’s residential real estate sector experienced significant growth. Home sales in the country reached an unprecedented value of Rs. 3.47 lakh crore (US$ 42 billion), indicating a strong 48% increase from the previous year. According to IBEF, the sales also showed a notable increase, increasing by 36% with 379,095 units sold.
India’s leading 8 cities are currently witnessing a remarkable increase in the demand for residential properties, reaching an all-time high. According to data from Knight Frank India, property sales in these cities have shown a steady 5% annual growth, with a notable 3.29 lakh apartments sold in 2023. Mumbai leads the pack with the highest sales, totaling 86,871 units and reflecting a 2% growth. Kolkata stands out with the most substantial surge in home sales, experiencing an impressive 16% increase, followed closely by Ahmedabad at 15% and Pune at 13%.
Thriving in key cities, the real estate market exhibits robust performance. However, the increase in home sales highlights the existing urban housing shortage, which currently stands at around 10 million units. To meet the growing urban population, a necessary measure involves having an additional 25 million affordable housing units by 2030.
Factors contributing to the increasing demand for affordable homes in India:Â
Satellite cities: Beyond the metros and major urban centers, satellite cities in Bangalore such as Chikballapura, Doddaballapur, Kanakapura, Tumkur and Hoskote are emerging as key hubs for affordable housing. They’re gaining prominence due to their connectivity to the city’s hubs through the ongoing development of STRR, PRR, and metro projects. The cost of housing, EMIs and rentals in these areas is significantly lower compared to larger cities. Additionally, these satellite cities are rapidly evolving as focal points for development and enhanced connectivity with the main city. A prime example is the efficient travel route between Bangalore and Chikkaballapur via NH44 and Bellary Road.
Upcoming infrastructure projects: The upcoming Satellite Town Ring Road (STRR), Peripheral Ring Road and Underground road network in Bangalore are improving connectivity with cities, facilitating faster transport. This enhances the interest of affordable homes in the linked areas. The tunnel road connects Yelahanka to the Central Silk Board (North to South Corridor) and Mekhri Circle to Cantonment (East-West Corridor). The 280.8 km STRR by NHAI links 12 towns, while the 74 km PRR or Bengaluru Business Corridor by BDA connects Tumakuru and Hosur roads, attracting homebuyers with faster connectivity and affordable housing options.
Easy financing: The Reserve Bank’s Financial Stability Report highlights a 14.2% increase in residential home loans, comprising a significant portion of total advances. The housing industry saw a 21.6% growth in sales in Q4 of 2022–2023. And with the non-performing asset (NPA) rate low, RBI makes financing accessible for investors and home buyers.
Rising income and rapid urbanisation: Rising income and job opportunities fuel urbanization, making real estate more accessible in cities. The Finance Minister stated a 50% increase in average real income during the Budget session. People’s financial status has improved in India due to rapid industrialization and job growth. And the need for affordable housing has increased in cities including Mumbai, Bangalore, Delhi, and Ahmedabad.
Population increase: By 2025, there will be 542 million urban population in India as compared to 2023 with 518 million. This shows how more reasonably priced housing is required to accommodate the growing population and demand.
Rise in nuclear families: In India, 50% of households are nuclear families, as per a survey by the National Council of Applied Economic Research (NCAER). And the increasing demand for real estate at reasonable prices is largely due to this shift in the Indian households.
The affordable housing sector is expected to maintain its positive momentum in 2024, marking a potential upswing for the rate-sensitive segment that has seen restrained growth in recent years. To address the increasing demand from buyers, real estate players are actively bridging the gap between demand and the required housing units. And also leveraging PropTech platforms for streamlined buying and selling processes, embracing a more digitized approach within the sector.
Driven by a surging demand for affordable housing, the government is actively supporting citizens through various initiatives. India’s ‘Housing for All’ initiative is poised to attract a substantial $ 1.3 trillion investment in the housing sector by 2025. Key policies, such as interest subsidies for homebuyers and a boost to affordable housing construction, are set to propel the top developers’ share in the Indian residential market to 29% in FY24, up from 25% in FY21. The government’s upcoming scheme, announced in the FY24 budget session, aims to assist deserving middle-class sections residing in rented houses, slums, chawls or unauthorized colonies to purchase or construct their own homes. This collaboration between the government and private entities is expected to meet the growing demand for affordable homes in India, fostering economic growth.
