Real Estate Sector of South India
An Indian Realty Chronicles Feature
One of the most globally recognised sectors across the world, the real estate comprises of four major sub-sectors - retail, housing, commercial and hospitality. The growth of the real estate sector goes well with the rapid growth in the corporate environment and demand for office space.
Among the major 14 sectors in the country, the construction industry ranks 3rd.
Both in the short term and the long term, it is expected the real estate sector will sustain more investment from the non-resident Indians (NRIs). The most favoured south Indian city by the NRIs is expected to be Bengaluru. Other cities followed by Bengaluru are Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.
Market Share of the Real Estate Industry
In 2019, the real estate market amounted Rs 12,000 crore (US$ 1.72 billion). By 2040, it is expected to grow to Rs 65,000 crore (US$ 9.30 billion).
The real estate market in India was US$ 120 billion in 2017. It is expected to reach a market size of US$ 1 trillion by 2030. By 2025, India is also expected to contribute 13 per cent to the GDP.
The demand for office space has also been increasing at rapid growth. In 2019, office leasing space reached 60.6 MSF in eight major cities. It also registered a growth of 27 per cent. By the end of 2019, the co-working space across seven major cities increased to 12 square feet.
In 2020, warehousing space is expected to reach 247 MSF. An investment rise of Rs 50,000 crore (US$ 7.76 billion) is also expected during the period of 2018-2020.
By 2022, grade A office space absorption is expected to increase by 700 MSF, and Delhi-NCR is expected to contribute the maximum to this demand. Across seven major cities, the housing sales reached 2.61 lakh house units.
Real Estate in Southern India
In India, southern cities like Bangalore, Chennai and Hyderabad have emerged to be the best-performing real estate markets.
As other cities across the country reported downward pressure on prices and saw a reduction of prices, southern cities resisted the recessionary pressures and reported price appreciation. Some of the reasons behind this are limited new project launches, focus on completing the incomplete projects, high retail growth, availability of land at reasonable prices, development of social infrastructure and high demand from NRIs.
The aspects that make south India a vibrant living hub are excellent healthcare facilities, pleasant climate and extremely trained staff. South India is considered perfect for senior citizens to reside in. Also, around 65 per cent of the overall senior citizen projects are located in South India.
“South India is a preferred destination for homebuyers who are planning to purchase properties for several reasons. Unlike the majority of markets across the nation, real estate in South India is end-user driven and not speculative. Majority of the properties across the region have a 3-4 year completion cycle, which is unlike the north where it takes around 5-7 years to complete a project. The region has also witnessed increased investment from the Non-Resident Indians (NRIs) in the recent past, who are attracted to this part of the country because of the stability of the market”, said Eshwar N, Chief Marketing Officer, Casagrand.
Top South Indian Cities to Invest in Real Estate
One of the most-preferred real destinations, Bangalore is preferred by investors not only in India but overseas as well. Some of the reasons behind the preference are smart infrastructure, macro-economic dynamics, presence of IT hubs and favourable climate conditions.
Between 2017-2019, the city reported 80 per cent increase in the overall housing sales. During the same period, the overall unsold stock reduced by 44 per cent.
As per the data reported by 99acres, there are 37,000 properties available for sale currently. Out of these, 86 per cent of the properties are ready-to-move-in. The homebuyers are also focusing on properties that are either nearly completed or ready-to-move-in.
In the past few years, the real estate industry in Hyderabad has grown rapidly. According to a survey conducted by JLL on 131 cities across the Asia Pacific Region, Hyderabad ranked as the second fastest-growing cities.
In Q3 2019, Hyderabad reported increased activity in the western suburbs in areas such as Kismatpur, Gopanpally and Kondapur. In terms of house sales, the city reported a 10 per cent increase.
In 2019, the western quadrant emerged on top in terms of new launches. The northern suburbs such as Kompally and Bachupally reported an increase of 14 per cent in property prices in the same year.
The first two months of 2020 witnessed robust residential and commercial activities. The Green Line of Hyderabad Metro Phase 1 - which is 11 km long - completed its construction in the first quarter of 2020. This increased the demand for neighbouring areas as well.
Immigrant attractiveness, demand from IT professionals and affordable properties are the reasons behind the preference of investors in Hyderabad’s real estate.
One of the top metropolitan cities in the country, Chennai has a high standard of living. The real estate in Chennai has seen significant growth in the past few years. The city has also been expanding its land coverage area.
Though the pandemic slowed down the growth in March, the overall launches in the first quarter of 2020-21 showed an increase of 23 per cent.
In 2019, the southern suburbs of Chennai, including Perungudi, Pallavaram, and Navalur were the popular areas in terms of new launches. Approximately 57 per cent of the launches were concentrated in the middle and upper-middle segments.
For Jan-Mar 2020 quarter, Southern Chennai remained the popular segment in terms of new launches.
Homebuyers prefer completed projects over under-construction projects in order to avoid inordinate delays. To lure homebuyers into buying these properties, the developers have resorted to discounts and attractive offers.
An opportunity for the real estate community to bloom is through the reduction in prices and the growing trend of co-living in the city.