Land and property relations have obtained the limelight of market dealings even since the market was non-existent. Since then, it has never stopped being a lucrative landmark for your financial investments. However, due to the Covid pandemic, we must know the real estate forecast next 5 years. The real estate business is among the top globally recognized field of investment. It has four sub-sections. They are:
As the corporate environment around us is manifesting itself quickly, that complements the rise of the real estate arena. With the growing urban population, there is a growth in demand for more space and accommodation. This leads to a boom in the construction industry. This industry ranks third in a list of 14 most important sectors in direct, induced, or indirect sectors.
Real estate in India is a highly profitable area that generates employment to a huge extent. Bengaluru ranks the highest in terms of favorability of investment. Dehradun, Delhi, Pune, Ahmedabad, Goa, and Chennai are also cities looking forward to its real estate boom.
A brief history of the real estate growth in the past years
To understand the real estate forecast in the next 5 years, we need to look into a brief history.
According to estimation, the market in real estate can grow from Rs 12,000 crore in 2019 to Rs. 65,000 crore in 2040. You can imagine real estate contributing around 13 percent to the GDP of our country by 2025.
Between July 2020 and December 2020, there was a transaction of approximately 22.2msf in the 8 top cities of the country. Information Sector enjoyed a flat 41 percent share in the latter half of 2020. Manufacturing sectors and BSFI had 16 percent shares each, whereas co-working sectors had 10 percent share and other services had 17 percent share.
Manufacturing and office space area
The sector of manufacturing was alone responsible for 24 percent office-space leasing in 2020. Manufacturers of electronic components and small and medium-sized enterprises are mostly leased in cities like Chennai, Delhi NCR, and Pune.
Ahmedabad, Pune, and Chennai witnessed the most leasing in the auto sector. The office space sector normally attracts the most shares. 15 percent share of retail and 7 percent share of warehouse and residential plots follow respectively. As per the real estate forecast in the next 5 years, the office space allocation investments are bound to increase.
In 2020, around 971 million US dollars and 220 million US dollar private equity investments took place in warehousing and retailing. Institutional Investments of around 5 billion US dollars in 2020 took place in the Indian market of real estate. Delhi NCR contributes the maximum to the demand of Grade-A office space.
In the latter half of 2020, housing projects in eight top Indian cities covered approximately 86,139 units. Between October 2020 and December 2020, the sales in homes also doubled in the eight top Indian cities. This is a great signifier of post-Covid recovery of business in the country.
Housing construction skyrocketed, but that also leaves behind a shortage of around 10 million units in urban spaces. By 2030 around 25 million accommodation spaces are required. This has a huge impact on the real estate forecast in the next five years.
In 2021, the Indian market of real estate has had PE investment worth Rs 23,946 crores. Investments grew 16 times as compared to what the scenario was in the financial year 2020.
Department for Promotion of Industry and Internal Trade policy showed construction as the third biggest sector in India’s Foreign Direct Investment inflow. This itself stood at 42.97 billion US dollars from April 2000 to September 2020.
Developments and investments in real estate
- In the first few years of Financial Year 2020, office space absorption increased around 5 percent in Delhi-NCR.
- A CBRE report suggests that the stock of flexible space in India might increase by 10 to 15 percent in the coming three years.
- New launches and sales of housing expanded by 51 percent and 29 percent, respectively, in the seven top Indian cities in the 4th quarter of the financial year 2021.
- The appreciation prices of property in Gurgaon and Noida grew by 13 percent and 11 percent, respectively.
- Mortgage rates were low in Financial Year 2021, leading to a recovery in residential sales in seven top cities.
- Among the most influential investors in the Indian private market, Blackstone expects to invest more than Rs 1625 crores in the coming ten years. This constitutes a great part of the real estate forecast for the next 5 years. It also crossed the 12 billion US dollar mark in investment in India.
- Anarock, a leading property consultant, estimates India having approximately 100 new malls in the coming year. 69 malls will be situated in the top 7 metropolitan cities of the country.
- Taj Group partnered with Ambuja Neotia Group and made three brand new hotels in Patna and Kolkata in November 2020.
- In March 2021, Godrej properties announced launching around 10 new projects of real estate.
- Godrej Properties acquired equity shares from HDFC Venture Trustee Company, and thereby it grew its stake in the Godrej Reality from 51 percent to 100 percent.
The government, coupled with state governments, also undertook some initiatives to promote developments in the real estate sector. The Smart City project is the most viable hub for the growth of real estate investments.
- Tax deduction in housing loan interest and tax exemption for cheap housing projects facilitated the real estate investments.
- Central Government’s Atmanirbhar Project gave tax reliefs to real estate investors and developers.
- The Ministry of Housing and Urban Affairs launched a portal for rental housing estates in 2020.
- Indian Government also took account of the real estate growth in Jammu and Kashmir. It started regulating the real estate Application Act 2016, whereby any Indian citizen could buy non-agrarian land.
- An Alternative Investment Fund worth Rs. 25000 crores initiated to restart 1600 halted housing projects.
We see in recent years there has been considerable growth in the real estate market due to both private and governmental backing.
The real estate forecast in next 5 years
Covid-19 pandemic and the lockdown had a crumbling effect on the Indian Economy. However, according to many experts, this was a boon in disguise for the real estate industry of India.
Real estate is going through a transition in Mumbai. However, in the second last month of 2020, there was the largest registration for residential areas in Mumbai despite the lockdown. This was because the Reserve Bank of India decided on a reduction of repo rates. Also, stamp duty decrease by state governments benefitted the industry’s growth.
Role of technology
Digital media sales greatly enhanced the sector’s rise, unleashing a completely new age in this industry. Many virtual properties were held, and the online listing has exposed the properties to the audience at large.
Data analytics rose considerably so did digital launches. Technology helped in the industry’s recovery hugely. Experts have hugely utilized technology as a marker in the real estate forecast in the next five years.
The growth in demand in certain pockets will see a rise in real estate prices, while in other regions, it will be considered stable. Also, mass vaccination effectively promotes a revival in the growth track of the Indian economy.
Securities and Exchange Board of India approved the real estate Investment Trust to spend in the Indian market of the real estate by several kinds of investors. It is supposed to create a niche of around Rs 1.25 trillion in the next few years. Considering the increasing globalization, there have been many shifts and accommodations in the real estate industry. Businesses primarily owned by families shifted to those which are professionally managed.
Residential smart cities
There is also a proliferation of several projects across different cities which are managed simultaneously by the investor. In facilitating that, they fall upon a centralized process that caters to sourcing materials, organizing the workforce, and hiring experts in several fields like architecture, engineering, and project management.
There is also a demand for residential housing of around 25 million units that need to be mended by 2030. The Pradhan Mantri Awas Yojana of the Union Ministry of Housing and Urban Affairs promises 20 million houses built, especially in urban zones. This will, in turn, lead to a subsequent sufficient increase in retail and commercial office areas.
FDI inflow in the real estate of India is also increasing substantially. Thus, India’s real estate is estimated to gravitate towards it a considerable amount of Foreign Direct Investment in the coming two years, along with an 8 billion US dollar capital infusion by the financial year 2022. The real estate forecast in the next five years includes FDI inflow as a major contributing factor.
Loss in the real estate business
While on the one hand there has been considerable recovery, on the other hand, according to another estimate there has also been a substantial amount of loss in this business. The small players in the game were financially distressed. Inventory was oversupplied. Execution capability was lacking. GST complications were there. The demand-supply equation suffered from a lack of effective understanding. Recent studies have shown that nearly 30 percent of players in the realty business will be looking for an exit route.
People still have hope to rebuild post the coronavirus pandemic. Those having money, ethics, and technological know-how, will efficiently survive this and bring in a new era of consolidation.
House price predictions for next 5 years
House price predictions are a constituent element of the real estate forecast in the next five years. The coronavirus impacted the house price greatly; especially the second wave’s impact has been far greater. This can stall the price growth due to huge demand. Corona lockdowns basically compelled people to save instead of spending. Hence, as a result, this affected the property rates.
However, since 2015, the affordability of housing has increased manifold. After the first covid wave, there was a huge housing demand. The second wave impacted this as well. But the report of JM Financial Institutions Limited has said that affordability of housing has increased till 2021.
Moreover, the shortage in the supply of raw materials is making things worse. Normally in the eight top cities of India, there has been stagnation in the price market. However, Ahmedabad and Hyderabad cities have seen considerable growth in property prices.
Housing Market Predictions in next 5 years
The market of real estate in the USA has been considerably strong in the year 2021. In the next five years, the real estate forecast should also undertake the housing market predictions for the given period of time. The rise in work-from-home jobs has led to a rise in housing demand. Mortgage rates are also meager, leading to further demand. However, there has been a considerable decline in growth in listing prices. The peak of the growth rates of home prices has passed, making it an advantage for the buyers.
Market at places is also highly favorable sellers. But there have been many active sales hence signaling the revival of a balance in real estate. While it is unlikely that house prices will decline steeply, but if the supply increases, it will be in an affordable range.
The demand in buying new homes is strong; hence the residential market is booming and will continue to do so. The forecast of realtor.com says that home sales will increase nearly by 7% in 2021.
- Fast sales will continuously dominate the market
- Housing accommodating single families are likely to increase
- Price gains will no longer be in strictly double digits
We see the real estate forecast in 5 years in India, and housing market predictions are stagnant, but it is still favorable to the sellers. The coronavirus lockdown and the pandemic have given more stress to the needs of space. Thus, if you are a seller or planning to invest in any business, real estate should be your priority. So, drop all your dilemmas and knock on its door; wealth will come!