Having made its way through a tumultuous 2020 relatively unscathed, things are beginning to look up again, for the Indian economy. Rebounding from the economy contracting by 23.9% in Q1 of 2020-21, the Reserve Bank of India believes that growth could be an overall 6.5% for H1 of 2021-22⁽¹⁾. Meanwhile, the IMF expects India to be the only major world economy to register double digit growth in 2021, at a projected a 11.5%⁽²⁾.

This positive tailwind is expected to have a major real estate component. Reduced home loan rates, a resurgent affordable housing segment – driven by the central government’s housing for all initiative⁽³⁾ – and a revival in consumer sentiment are adding up to the beginnings of a period of growth in real estate. The positive sentiment is set to be reinforced further, by the arrival of two affordable and effective COVID-19 vaccines, with six more undergoing final trials. 

Driving growth beyond the Metros

With many corporates extending their work-from-home arrangements, professionals – especially millennials and gen-z – are looking beyond the crowded and often exorbitantly priced major metros. If online property searches are any indication, this trend is gathering steam with every passing month. ‘Tier -2’ residential real estate markets – such as Meerut, Siliguri, Mysuru, Kanpur, Udaipur, Rohtak, Vijaywada, and many more – are offering cost-conscious and discerning first home buyers a viable alternative.

Apart from the positive impact for the wider economy, that such growth in real estate demand and inevitable new construction always stimulates, the ‘reverse-migration’ of young professionals will lead to growth in several tertiary markets. Accustomed to the convenience and services that were previously restricted to larger Indian cities, these new entrants are set to unleash massive growth in the services sector, in Tier 2 and Tier 3 cities. In addition, with India’s vibrant startup ecosystem and IT industry leading the relocation, the economy will benefit from many more centers of innovation, and a wider pool of entrepreneurs.  

The positives are lining up

India, famously, is home to one of the largest young populations in the world. This demographic dividend has already led to a growth in innovation and emerging technologies. But one of its most significant outcomes could be the impact that this segment of the population has on real estate. India received the maximum influx of foreign institutional investment of all emerging markets, for the second year in a row, in 2020. Realty reforms, and growing number of potential buyers, has meant that influx of these funds, across various real estate classes, is robust and growing.

In a world looking for growth opportunities, assured returns, and markets that are rebounding quickly from the negative economic effects of the COVID-19 pandemic, the Indian real estate market presents global capital with a safer bet than most. But the most significant outcome is likely to be the win-win that this expansion in real estate will cause for the larger economy. With a significant surge in new construction expected to meet the growing demand, several heavy industries will benefit from a sustained boost in demand. The concurrent growth of manufacturing and services should add momentum to the economy, and real estate will be at the heart of this upswing.

1. https://www.businesstoday.in/current/economy-politics/rbi-predicts-indian-economy-stopped-shrinking-01-percent-07-percent-gdp-growth-projected-in-next-2-qtrs/story/424026.html
2. https://timesofindia.indiatimes.com/business/india-business/imf-projects-11-5-gdp-growth-experts-say-india-to-achieve-5-trillion-economy/articleshow/80475641.cms