Indian real estate expected to touch $1.5 tn by 2034; drive 15% of economic output: Knight Frank India - CII Report

Urban cities in India will require 78 mn new homes between 2024-34; Upcoming demand could lead to $906 bn worth of new homes by 2034

The value of the Indian real estate sector will touch an estimated $1.5 trillion, constituting 15% of the total economic output by 2034. The residential market is expected to lead with a value of $906 billion, followed by the office sector contributing $125 billion, a report titled ‘Indian Real Estate: A Decade from Now’, Knight Frank India, in association with the Confederation of Indian Industry (CII), has said.

The value of the Indian real estate sector will touch an estimated $1.5 trillion, constituting 15% of the total economic output by 2034 (HT FILE)

Land for manufacturing activities is estimated to generate a value of $28 billion, driven by rising demand in India, while warehousing is projected to yield revenues of $8.9 billion, it said.

In 2023, the sector's market size was approximately $482 billion, contributing 7.3% to the total economic output.

According to the report, India's economic growth in the next decade will depend heavily on several factors, including a growing young population, bolstered domestic manufacturing, infrastructure development, and urban expansion. Under favorable conditions for these drivers and assuming an annual 2% depreciation of the rupee to $ exchange rate, India's GDP could potentially reach $10.3 trillion by 2034.

Residential Real Estate 2034

India’s population is expected to surge to 1.55 bn by 2034 with an estimated 42.5% of the population residing in urban centres. As per the estimates from Knight Frank Research and CII, to accommodate the burgeoning urban population, urban cities in India will require an addition of 78 mn housing units by 2024-34.

By 2034 it is estimated that a substantial portion of the population will be in the lower-middle and upper-middle-income brackets. Consequently, generating housing demand for the affordable segment, gradually transitioning towards the mid-segment.

Demand from high-net-worth Individuals expected to increase

The proportion of High-Net-Worth Individuals (HNIs) and Ultra High Net Worth Individuals (UHNIs) households in India are expected to rise from 3% to 9% by 2034, also driving significant demand for luxury housing. This surge in demand will have the potential to generate an additional market value output of approximately $ 906 billion over the next decade.

Commercial real estate 2034

In 2008, the top 8 cities in India cumulatively accounted for 278 mn sq ft office stock; which has now increased to 900+ mn sq ft. In the last few years. Tier 2 and 3 cities in India have also witnessed a rising demand and supply for office real estate in India. Factors such as business expansion, low costs, infrastructure development, rise of IT and the services industry, and the availability of talent are some of key drivers of growth in office stock in Tier 2 and 3 cities.

The report expects Global Capability Centres (GCC) to potentially drive the office market in the next decade. By 2030, there will be an estimated 2,400 GCCs across India as India emerges as a global technology and services hub. Assuming a similar pace of growth, the number of GCCs in India may scale up to 2880 by 2034.

"In the coming decade, India's economic ascent will be marked by an unprecedented surge, with the real estate sector poised to be a cornerstone of this transformative journey. Fueled by burgeoning wealth, robust consumer spending, infrastructural advancements, entrepreneurial fervor, and strategic initiatives like 'Make in India', our nation stands on the brink of a profound economic evolution. We anticipate the Indian real estate sector to grow to a $1.5 trillion powerhouse by 2034, constituting a remarkable 15% of the nation's economic output,” said Gulam Zia, Senior Executive Director - Research, Advisory, Infrastructure, and Valuation, Knight Frank India.