Why to invest in Indian real estate sector : KPMG Report

The residential segment which contributes about 80 per cent to the real estate sector is expected to grow significantly over the next few decades. It is estimated that Indian cities need to develop at-least two million  houses annually for the growing population.

The actual number could be much higher as it does not include push in demand from re-development and shrinking size of households. Further, there was a housing shortage of about 18.7 million in 2012.

Thus, India needs to develop almost 45-50 million housing units by 2028

 

Drivers of the real estate sector

1. India economy is expected to be the fastest growing economy for the next few decades
2. The growth could be primarily driven by infrastructure investment and the rising manufacturing and service sector
3. The per-capita income in urban India is expected to triple from USD2,800 in 2012 to USD8,300 in 2028
4. About 10 million people are moving to Indian cities every year
5. About two million houses are required to be developed each year, typically in the affordable segment.
6. About 35 per cent of India’s population is between 15-35 age bracket which is expected to drive the demand for housing over the next 15 year.

 

Affordable housing :

 

Affordable housing in India refersto housing for the economically weaker section (EWS) and lower

income group (LIG) households. Thissegment is expected to account for85-90 per cent of the total residentialdevelopment (number of housingunits) i.e. about 40-45 million housingunits by 2028. Affordable housing inIndia ranges from 250-650 squarefeet (one or two bedroom set)and typically costs between USD8,000-17,000 per unit. Considering an average housing size of 400 square

feet, India requires about 15-18 billion square feet of development in this segment alone.

 

Mid-income housing :

As the name suggests, the mid-income housing is for households where income ranges from

USD3,000-28,000 per annum.By the year 2026, it is expected that middle class households may triple from 31.4 million to 113.8 million. Themid-income housing market is expected to account for 7 per cent of the total housing demand till 2028 which is 3-3.5 million houses. An average mid-income

house is about 800-1,200 square feet (two or three bedroom set) taking the total development to about 3-3.5 billion square feet. A mid-income house can range anywhere between USD17,000-

170,000 varying across different cities. 

 

Luxury housing :

The luxury housing is the fastest growing segment among residential housing. Between 2008 and 2012, about 182 luxury projects comprising 25,570 units across top seven units were launched

with a value of about USD30 billion. Many of these units were absorbed, fuelled by a strong growth in high net worth individual population. In 2012, India clocked an impressive second highest growth of about 22.2 per cent in its HNI population. It is expected that the India’s HNI population would more

than triple to 329,000 by 2018. Luxury housing concept in India generally refers to houses which are more than USD170,000 and are at least 1,200 square feet in size with no cap on the higher side. It is expected that India would require 1.5 million luxury houses over the next 15 years.

 

The latest trend among luxury housing is branded residences and golf townships. Leading developers in India are collaborating with renowned global luxury brands and hotel chains to develop

branded-luxury villas, flats and service apartments. The developers are scouting for new ideas to attract the HNIs’ attention and luxury livings