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Strong quarter ends a bonanza CY23

Residential segment continues to shine

Despite the uptick in interest rates, escalating prices and global challenges, the housing market retained an optimistic outlook, marked by soaring property sales. This was driven by growing consumer confidence, shift to luxury housing, and the resilience of the Indian economy. Per property consultant Anarock, in CY23, new launches showed a significant annual growth of 25% (~445k units were launched in top-seven cities). Sales surpassed all prior benchmarks, posting a decadal high of 476k units and a yearly growth of 31%.  

Demand was backed by robust supply pipeline, with many branded developers having announced new launches and entry into newer markets. In Q3FY24, both new launches and sales reached record highs, with launches totaling 117k units, up 26% YoY, and sales at 127k units, up 38% YoY. Prominent grade A developers such as Brigade Enterprises, Godrej Properties and Sobha Realty posted best-ever quarterly sales.

Commercial segment – Traction in leasing

Despite global volatility, India’s commercial real estate market was resilient in 2023. Per Knight Frank, office leasing grew a notable 15% YoY, resulting in absorption of 59.6msf in CY23, within striking distance of historical highs. This growth is predominantly led by employees returning to offices and the expansion of global companies' operations in India. With the increase in transaction volumes, rentals also stabilized in various micro-markets.

Chennai made it to the top-three list for the first time, with ~2x leasing activity as compared with 2022, primarily due to a surge in demand from global capability centers (GCCs). Pan-India, GCCs accounted for 37% of leasing transactions.

Outlook: Anticipating further growth

India Real Estate breached the previous peak levels (in CY22) led by sustained demand momentum. And CY24 is on course to continue the trend provided no major headwinds obstruct construction activities. The industry is witnessing demand consolidation towards grade A developers, a trend that is projected to persist. The launch pipeline by these developers is expected to strengthen further through new land acquisitions in strategic locations and growth corridors.

Office portfolios may expand further as hybrid working evolves with strong ‘office-first’ approach. India's growth ecosystem attracts both domestic and foreign occupiers, with global corporations making substantial investments and domestic occupiers expanding. These dynamics are set to bolster office market fundamentals in 2024.

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