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Indian Real Estate Outlook

Alternatives
Real Estate

30/09/2024

Simon Wallace

Global Co-Head of Real Estate Research

Seng-Hong_Teng_headshot

Seng-Hong Teng

Research Analyst Generalist

Saeesh_Kakodkar_headshot

Saeesh Kakodkar

Asset Manager Real Estate

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IN A NUTSHELL

  • India is today the fifth largest economy in the world, and following major supply side reforms, alongside exceptional demographics, the economy is set to overtake Germany and Japan by the end of the decade.
  • Indian commercial real estate is in its early stages of development. Transaction volumes have been rising gradually over the past ten years, reaching an annual level of close to €10 billion in early 2024.
  • Taking together our expectations for entry yield, yield compression and rent growth, our initial forecasts for the Indian market suggest that prime net returns across the office and industrial sectors over the next five years could be in the range of 13-15%, with Bangalore and Mumbai tending to outperform Delhi.
  • We believe initial investment into India should focus on a small number of the largest and fastest growing markets, such as Mumbai, Bangalore, and Delhi. Within these markets we favour the development of high specification logistics, the development of data centres, and investment into core office.

Young, educated and growing, India is poised to be one of the largest economies in the world. While driving demand, this future success will also require extensive development of modern real estate across all major sectors. For a long time, Indian real estate has been a sleeping giant, but the giant is stirring, and will soon be ready to wake.

Macroeconomics

 

A Sleeping Giant Awakens 
Having sat in twelfth place just twenty years ago, India is today the fifth largest economy in the world.[1] The country however remains a long way away from fulfilling its full potential. Despite impressive annual real growth of 6% over the past decade, output per head remains a fraction of that seen in China.[2] However, this appears set to change. Following major supply side reforms, digitalisation, and infrastructure improvements – raising the country’s Ease of Doing Business ranking from 142nd in 2014 to 62nd in 2019[3] – the country looks set for a sustained period of strong GDP growth. Add to this an exceptional demographic profile, with a young, highly educated, and growing population, the economy, appears set to overtake Germany and Japan by the end of the decade, with some projecting it could be the largest economy in the world before the end of the century.[4]

Indian Real Estate Outlook
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More topics

1

IMF, June 2024

2

Oxford Economics, June 2024

3

World Bank, June 2024

4

CEBR, July 2023

This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation.

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