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In its latest report – Tamil Nadu: Unveiling Economic Dynamism and Future Potential, by Knight Frank India, a leading real estate consultancy in the country, in association with the Confederation of Real Estate Developers' Associations of India (CREDAI)- Tamil Nadu, has estimated that Tamil Nadu’s Nominal Gross State Domestic Product (GSDP) would expand to approximately US$ 2.6 trillion by FY 2047-48.

Tamil Nadu stands as the second-largest state economy in India, contributing 8.8% to the nation’s GDP. In FY 2023, the state GDP is estimated to have expanded to USD 294 bn. Over the 10-year period before the onset of the COVID-19 pandemic (FY 2009-2019), Tamil Nadu’s economy experienced an average annual growth rate of 11%. At this pace of growth, FY 2047-48, when India attains its centenary of independence, Tamil Nadu’s Gross State Domestic Product (GSDP) is likely to expand to USD 2.6 tn, resulting in the state being one of the key contributors to India’s overall economy.

Agriculture, services, manufacturing, and others play crucial roles in driving the state’s economic prosperity. Presently, the services sector stands out as the primary catalyst, contributing 53% to the overall economic growth of Tamil Nadu.

The state’s growth ambitions are set to drive the need for expanding economic activities into tier 2 and 3 cities of Tamil Nadu, accentuating the pace of urbanization. This trend is expected to significantly boost the construction sector, encompassing real estate and infrastructure development. As of FY 2022-23, the size of Tamil Nadu’s construction sector is estimated to be USD 32 bn, contributing 11% to the state’s overall economy. Projected at the current growth rate, this sector is poised to expand to USD 208bn by FY 2047-48.

The manufacturing sector, which accounts for 19% of the state’s economy, is expected to expand to US$ 374 billion (bn) by FY 2048. To cater to the expansion of the manufacturing sector in the state, there would be a requirement of 2,25,728 hectares (557786 acres) of industrial land in Tamil Nadu. As of 2021, Tamil Nadu has 19,520 ha (48235 acres) of industrial land.

Estimated Rise In Contribution From Real Estate And Construction Sector

Shishir Baijal, Chairman and Managing Director, Knight Frank India, expressed, "Tamil Nadu has consistently stood out as one of the most economically advanced states in India, making substantial contributions to the national GDP. Its economic structure is well-balanced across primary, secondary, and tertiary sectors, fostering stable growth. This trend is expected to persist in the future, primarily because the state does not rely solely on a single industry for its development. Since 2009 the state has grown at an average of 11% annually. According to our projections, Tamil Nadu has the potential to reach a GSDP of US$ 2.6 trillion by 2047. To realize this potential, the state must strategically invest in industrialisation and urbanisation. Our estimates indicate that an additional capital investment of USD 111 billion from FY 2025-48 is required. This investment will facilitate the envisioned economic growth across sectors including real estate."

Based on the evaluation by Knight Frank the anticipated growth in the key sectors of manufacturing, construction, services, agriculture, etc. assuming the continuation of the current growth trajectory, by FY 2047-48, the sectors are expected to expand at the pace outlined below.

Services and agriculture sectors are expected to expand to USD 1417 bn or INR 165 tn and USD 56 bn or INR 8 tn respectively by FY 2047-48.

Real Estate Economics of Tamil Nadu 2047: Residential and  Office

Currently, Tamil Nadu holds the distinction of being the most urbanised state in India with 48% of its population residing in urban areas according to the Census of 2011. By the year 2047, it is anticipated that 68% of Tamil Nadu’s population will be urbanised. This translates to an estimated 35 mn households residing in urban cities, surpassing the projected average for India which is estimated to be 51% according to the India Real Estate Vision 2047, Knight Frank Research. To cater to the urban households housing requirement, cities in Tamil Nadu would require 20 mn additional houses by 2047.

As of FY 2022-23, Tamil Nadu had 1.4 mn employees registered with the EPFO (Government of India). Considering this as a proxy indicator, to reach the potential state GDP estimate of USD 2.6 tn in FY 2047-48, the formal employment in the state is estimated to rise to 19 mn. This would necessitate a requirement of 1.2 bn sq ft of office space in Tamil Nadu, which includes office requirements for public, private and multinational agencies.

The expansion of economic activities will generate employment opportunities across sectors, which in turn will generate a demand for office real estate. Already, Tamil Nadu is an attractive destination for companies across categories such as Information technology, manufacturing, Global Capability Centres (GCCs) etc to establish their workspaces in the state. Currently, the state has the most operational SEZs in the country i.e. 50 out of 270 SEZs, which include both IT and non-IT SEZs, generating vast employment opportunities.

With the groundwork laid out and projections contemplated for the state, it is pertinent to delve into specific aspects that could accelerate the growth rate or strategically influence key vectors for the state's advancement.

Introduction of a State level Retail focused policy

For Tamil Nadu to realise its ambitious target of achieving a USD 1 trn economy by 2030, a strategic imperative lies in the introduction of a targeted retail-focused policy. While the state has successfully implemented sectoral policies that have catalysed growth in specific industries, a dedicated retail development policy is essential to unlock the full economic potential.

Given Tamil Nadu's status as the textile capital of the nation, a well-crafted retail policy can harness this strength, creating a symbiotic relationship that propels both the retail sector and the state's economic landscape forward. Such a policy would not only stimulate economic growth by fostering employment opportunities and encouraging entrepreneurship but also contribute significantly to achieving the broader economic milestones set for Tamil Nadu.

Ideally the Tamil Nadu retail policy should be proposed keeping in mind the following objectives which can help the state harness its true potential: Job Creation and Economic Growth, Entrepreneurship Promotion, Women's Empowerment, MSME Growth and Revenue Contribution with implementation strategies which entails skill development programs, financial incentives, women-centric initiatives to participate and lead retail enterprises, technology integration and lastly, establish a robust monitoring and evaluation framework.

Mr. Habib W.S, Chairman, STATECON 2024, said “In the dynamic landscape of Tamil Nadu's development, the STATECON conference takes centre stage, embracing the theme "Conservatism to Cosmopolitanism." Following the Global Investor's Meet, this gathering aspires to catalyse the state's progress. From exploring spatial tech and AI in real estate to delving into alternate funding and emerging asset classes, the diverse sessions promise a comprehensive journey through the realms shaping Tamil Nadu's future. May *STATECON* be a catalyst for prosperity and growth in the cultural heartland of Tamil Nadu

Advisory on Infrastructure and Housing Development

Infrastructure development is a pivotal enabler for economic growth, connectivity, and overall liveability. While the Tamil Nadu government has made substantial investments in ongoing and upcoming projects, there are specific measures that can further enhance the existing infrastructure: Regular Debottlenecking of Ports, Regular Debottlenecking of Airports, Focus on Enhancing Stormwater Infrastructure Implementation across Tamil Nadu and smart urban planning. Given the geographical diversity of Tamil Nadu, with varying climatic conditions, there is a need to emphasize the enhancement of stormwater infrastructure. This involves the construction and maintenance of systems to manage rainwater, preventing flooding and waterlogging during heavy rainfall. Effective stormwater infrastructure contributes to disaster resilience and overall urban planning.

As part of the Government of India's Smart Cities Mission, twelve cities in Tamil Nadu have been designated for transformation into smart cities. These cities include Chennai, Coimbatore, Dindigul, Erode, Madurai, Salem, Thanjavur, Thoothukudi, Tiruchirapalli, Tirunelveli, Tiruppur, and Vellore. However, it is an ongoing process that necessitates consistent updates and revisions to align with the evolving dynamics of both the city and its region.

Srinivas Anikipatti- Senior Director - Tamil Nadu & Kerala, Knight Frank India, said, “Tamil Nadu stands at the forefront of India's economic resurgence, strategically positioned to capitalise on a confluence of positive factors. The global economic recovery, bolstered by the China + 1 strategy, has propelled the state's manufacturing sector into a key player, attracting major investments, particularly in the electronics industry. Government-led reforms and infrastructure initiatives like Bharatmala and Sagarmala have fortified Tamil Nadu's business environment, enhancing its economic prospects. The state's commitment to digital transformation aligns seamlessly with India's broader technological shift, fostering growth in the IT sector and expected to be at the front-runner in harnessing India’s manufacturing prowess.”

Provision of housing facilities for workers:  The State should endeavour to provide housing facilities for workers, akin to hostel accommodations, which can serve as a crucial factor in attracting and retaining a skilled workforce. Here's a breakdown of the key considerations and benefits:

* Site Selection: Identify strategic locations near industrial zones or manufacturing hubs where there is a demand for a labour force. Proximity to workplaces reduces commuting time and enhances convenience.

* Amenities and Infrastructure: Develop comprehensive infrastructure with amenities such as living quarters, common areas, recreational spaces, and essential services like healthcare and grocery stores. This ensures a holistic living environment for workers.

* Affordability: Design housing solutions that are affordable for the target demographic. Implementing cost-effective construction methods and utilizing available resources can contribute to affordability.

* Migration Attraction: Offering on-site housing can indeed attract migrant workers, as it provides a ready-made solution to the accommodation challenge often faced by those relocating for employment. This can significantly ease the transition for workers.

* Community Building: Foster a sense of community within the housing facilities. This can be achieved through communal spaces, events, and initiatives that encourage social interaction and camaraderie among residents.

* Safety and Security: Prioritize safety and security measures to ensure the well-being of residents. This includes secure premises, well-lit areas, and emergency response systems.

* Regulatory Compliance: Adhere to local building codes and regulations to ensure the legality and safety of the housing facility. Engage with local authorities for necessary approvals.

* Employer Involvement: In some cases, employers may take an active role in providing or facilitating worker housing. This can be done independently or through partnerships with housing developers.

* Public-Private Partnerships: Explore opportunities for collaboration with government bodies or private developers to enhance the scale and efficiency of housing projects.

Advisory on Promotion of Tourism

Tamil Nadu, known for its rich cultural heritage and varied landscapes, possesses considerable tourism potential. Despite welcoming 501.7 million tourist arrivals (comprising Domestic Tourist Arrivals and Foreign Tourist Arrivals), the state is eager to amplify its tourism sector. While the recent Tamil Nadu Tourism Policy 2023 is a commendable initiative, incorporating global best practices in tourism promotion can further boost revenue and enhance visitor engagement. Here are some suggested strategies for improvement:

Influencer Marketing: - Collaborating with influencers who can promote the state’s tourism.

Improve Infrastructure: - With plans to upgrade infrastructure at 300 tourist sites, the Tamil Nadu government aims to create a more accessible, comfortable, and attractive environment for visitors.

Improve Ease of Doing Business: - Tamil Nadu should prioritize improving the ease of doing business in the sector. This involves fostering collaboration among stakeholders to streamline processes, enact investor-friendly changes etc.

Strategic hotel development: The state should focus on establishing luxury hotels in tourist hotspots and promoting branded hotels in industrial cities for Meetings, Incentives, Conferences, and Exhibitions (MICE) tourism. As manufacturing experiences, a forthcoming upswing and foreign companies continue to establish a presence, promoting well-known hotel chains in Tier 2 and 3 cities such as Tuticorin, Erode, and Hosur would effectively serve the needs of long-term guests.

Based on our estimates, Tamil Nadu has the potential to attract approximately 4.96 million tourists by the year 2047. Through well-devised strategies and collaborative efforts, the state stands a significant chance to enhance its tourism sector, ultimately resulting in higher state revenue and fostering economic growth.

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