Vision 2047

This report offers a comprehensive perspective on how India’s real

2023 estate sector will witness transformative trends over the next 25 years, www.knightfrank.co.in/research
reshaping its landscape and propelling growth.
Foreword

Shishir Baijal Rajan Bandelkar, President, NAREDCO

Chairman and Managing Director - Knight Frank India

The real estate industry in India has had an exhilarating journey over the last 25 years. 2047 will mark the Centenary of India’s Independence, “Vision 2047”, for Indian Real Estate,
As the nation hurtles forward into a new era of urbanization, economic dynamism, and is about the roadmap of India’s economic growth, and the role of real estate as one of the
technological innovation, the real estate landscape is poised for a transformative evolution. leading engines of that growth story.

Anticipating the coming decades, India’s real estate sector is set to experience a With introduction of economic reforms and liberalisation in 1991, India’s economy has
convergence of trends that will redefine its contours. Rapid urban migration, driven by transitioned through multiple changes with broad based developments across the sectors
demographic shifts and changing lifestyle preferences, will continue to steer demand – manufacturing, services, financial and more. In the last 25 years, India’s economy has
towards housing solutions that offer modernity, sustainability, and smart living. The grown at an average real rate of 6%, going through cycles of economic expansion and
expansion of digital technologies, including virtual reality tours and AI-powered property contraction. During this period, the size of the Indian economy expanded from USD 0.5 bn in
analysis, will revolutionize the way properties are marketed, bought, and managed, 1998 to USD 3.4 bn in 2022 and is currently positioned as the fifth largest economy globally.
enhancing transparency and consumer experiences. Factors such as policy initiatives to enhance business and investment sentiments, growth
in manufacturing and service industries propelled India’s economic growth thus far. As a
Furthermore, the escalating focus on environmental consciousness will propel the
result, there has been an increase in per capita incomes, spurring individuals’ consumption,
industry towards eco-friendly construction practices, sustainable materials, and energy-
including that of real estate.
efficient designs. Urban infrastructure will adapt to new mobility patterns, influencing
the development of integrated communities that balance live, work, and leisure spaces. Factors such as demographic advantages, improving business and investment sentiments,
Additionally, government policies aimed at simplifying regulatory frameworks and fostering government policy push towards high value generating manufacturing and infrastructure
foreign investment will foster a more investor-friendly ecosystem, boosting growth and sector etc will contribute to a significant expansion of the Indian economy by 2047, i.e., when
funding avenues. India attains 100 years of Independence. Since real estate is a derived demand, a multifold
economic expansion will boost the demand across all the asset classes in the segment.
In the pages that follow, we embark on a journey, envisioning a real estate industry that
The demand for residential, commercial, warehousing, industrial land developments etc
harmonizes innovative technologies, environmental stewardship, and urban ingenuity. The
will grow at a multiplier rate to accommodate the growing needs of the economy and
road ahead is exciting, as we witness the metamorphosis of brick-and-mortar structures into
consumption needs of the individuals.
interconnected, sustainable, and intelligent habitats that cater to the aspirations of India’s
future generations. Factors such as rapid urbanisation and growing income levels, will boost the residential
demand across all the price segments. The demand for commercial real estate will
generate from growth in businesses in the service sector, expansion of domestic
companies, startup ecosystems etc. Consumption in Tier 1 cities, along with potential growth
in Tier 2 and 3 cities will generate demand for warehousing activities. Additionally, the recent
policy initiatives by the central government to push manufacturing as the key growth driver
will propel the demand for infrastructure supporting industrial developments.

In the next 25 years, with a significant growth in the size of the economy, the real estate
industry is poised for enormous opportunities in terms of shifts in consumption patterns as
well as in revenue expansion. I look forward to this report being the roadmap, defining the
real estate growth story, in turn reflecting upon its role as a leading engine which will take the
Indian economy not just to the ‘top 5’ globally, but the ‘best’.
 India’s economic growth over the years

12
10
8

GDP, Constant Prices (% YoY)

6
4
2
0
-2
-4
-6
-8

2017
2011
2007

2013
2001

2014
2015
2012

2021
2016

2018
2000

2020

2020
2019
2003

2005
2002

2004

2006

2022
2008
2009
1998
1999
Source: GoI, Knight Frank Research

Size of India’s economy, at current Resulting from improving economic conditions, the per capita income of
prices, USD tn households in India increased from INR 38,693 in 1998 to INR 1,13,395 in
2022.

By 2047, when India reaches 100 years of independence, the size of India’s
40.0
economy is estimated to range between USD 33 tn to USD 40 tn1. Factors
36.4 such as demographic advantages, improving business and investment
sentiments, government policy push towards high value generating
35.0 manufacturing and infrastructure sector etc will robustly support India’s
economic expansion.

30.0 Range of India’s economic size in 2047

GDP, At Current Prices (USD trillion)

India Real Estate:
Maximum Growth Scenario

25.0 40

Vision 2047
19.4 Base Scenario
20.0
36.4

15.0
Minimum Growth Scenario
Since the introduction of economic reforms and liberalisation in 1991, India’s economy has transitioned
through multiple changes with broad based developments across the sectors – manufacturing, services, 33
9.5
financial and more. In the last 25 years, India’s economy has grown at an average real rate of 6%, going 10.0

through cycles of economic expansion and contraction. During this period, the size of the Indian 20 25 30 35 40 45
economy expanded from USD 0.5 bn in 1998 to USD 3.4 bn in 2022 and is currently positioned as the 5.0 GDP, at Current Prices ( USD trillion)
5.0
fifth largest economy globally. Factors such as policy initiatives to enhance business and investment 2.5
sentiments, growth in manufacturing and service industries propelled India’s economic growth thus far. 1.0 Supported by policy focus towards attracting foreign investments, India
0.5
has emerged as one of the favourable investment destinations globally.
0.0
Between FY 2000-01 and FY 2022-23, India’s economy has witnessed a
2017

2040E
2026E
1998

2006

2032E

2047E
cumulative FDI inflow of USD 477 bn and FPI inflow of USD 253 bn.

Source: GoI, Knight Frank Research

1
Assumption of : a) 11% and 12.2% CAGR, b) Annual INR depreciation of 2% against USD
 Foreign investments into India Real estate sector contribution to total economic
Net FDI Net FPI Multifold growth in India’s real estate market size
output % share
(USD billion)
50000
5833
2047E
40000
15.5%
30000 2030E
USD Million
USD Million

20000 1023
2022 7.3%
10000
477
0
7.3%

-10000
2022 2030E 2047E
-20000 Source: GoI, Knight Frank Research Source: GoI, Knight Frank Research

2011

2018
2001

2007

2008

2012
2000

2002

2003

2004

2009

2020

2013

2014

2015

2016

2017

2019
2005

2006

2020

2021

2022
The growth in the real estate sector simultaneously promotes growth in allied industries relating to steel, cement, and other
Source: GoI, Knight Frank Research construction raw materials. As per our analysis, 1% growth in the real estate development contributes to 8% growth in the
steel and cement production.

Real estate growth impetus to key construction materials

2022 2030E 2047E

Size of the Economy (USD tn) 3.4 7.2 36.4

India Real Estate Contributions

Real Estate Output (USD bn) 477 1023 5833

Steel Production (Bn tonnes) 14.5 29.4 111.3

Supported by a growing economy, the real estate sector in India has Cement Production (Bn tonnes) 32.8 58.5 177.6
transitioned significantly. India’s real estate sector has forward and backward Real estate sector contributes
Source: Company data, Knight Frank Research
linkages with approximately 250 ancillary industries, and it is one of the highest 18% to the total employment
employment generators after the agriculture sector, accounting for 18% of in India
the total employment. In terms of output, the market size of India’s real estate Real estate contribution to the state revenues:
sector is currently estimated at USD 477 bn contributing 7.3% to the total
Real Real estate sector is one of the key contributors to the revenue of state
economic output. By 2047, India’s real estate sector is estimated to expand to Eastate
governments. In FY 2022-23, an estimated INR 2 tn was collected by all
USD 5.8 tn contributing 15.5% to the total economic output. Factors such as
the states and UTs in India from stamp duties, registration fees and land
escalating demand for residential properties arising from rapid urbanisation 17.5% revenue. This is equivalent to 5.4% of the total revenue collected by all the
and growing disposable incomes of individuals are supporting the fast paced
states and UTs in India during FY 2022-23.
expansion of the real estate industry in India. Apart from residential, the
increasing need for contemporary office space, the need for hospitality and In addition to the state revenues, the real estate sector has also evolved as
retail real estate development to cater to the growing consumption needs of a tool for financing infrastructure development in the country. Mechanisms
the population are some of the other key growth inducing factors leading to real like value capture financing have enabled state governments and
estate expansion in India. Furthermore, expanding e-commerce is catalysing municipalities to raise financial resources by tapping into the increase
the demand for warehousing and storage facilities in India providing a thrust to in value of real estate properties and land resulting from government
the industry. Additionally, in recent years, the growing use of telecommunication investments and policy initiatives. On various instances value capture
82.5%
services has necessitated the need for data centres or data storage facilities in financing tools such as land value tax, betterment levy, development
India. From a government policy perspective, various initiatives such as focus Other charges, transfer of development rights (TDRs) etc have enabled the
on affordable housing, smart city projects, tax deductions on housing loans etc generation of additional revenues which has further been used for funding
have enabled investment opportunities in the real estate sector in India. infrastructure development of the cities.
Source: GoI, Knight Frank Research
 Residential Real Estate:
Changing Dynamics
India’s residential market has undergone significant changes over the last few decades. From the early 2000s, the
residential market has experienced periods of growth and decline owing to various factors such as the global and domestic
tudy
Case s
economic conditions, government policies, with the most recent being the COVID-19 pandemic. Global events such as
the 2008-09 GFC along with structural shifts in India’s domestic economy due to demonetization, implementation of
GST and RERA, and the NBFC crisis, besides the onset of the COVID-19 pandemic in 2020, were some of the key events
which dampened the growth of the housing market in India. However, phases of strong economic growth and increase
1% additional cess on stamp duty levied on property in disposable incomes accentuated the housing demand. Policy interventions like RERA strengthened India’s real estate
transaction in Maharashtra sector, making it more transparent and consumer centric. In 2021, although India’s economic growth continued to be
hindered by recurring waves of the COVID-19 pandemic, the housing demand witnessed a turnaround supported by
The metro cess in Maharashtra is a one percent tax levied on the value of multiple factors such as decadal low lending rate, stagnant or affordable prices, and the end user’s sentiment towards
property purchases in four cities of the state: Mumbai, Pune, Thane, and home ownership as people were spending maximum time at home due to recurring lockdowns. Additionally, the reduction
Nagpur. The cess was first introduced in February 2019, but its implementation in stamp duty rates in states such as Maharashtra, Karnataka, and West Bengal supported home purchases. Apart from
was paused for a year due to the outbreak of COVID-19. It was revived and low lending rates, the strong hiring trend witnessed in India’s IT sector and gains from financial markets which boosted the
implemented again from April 1, 2022. The proceeds of the metro cess are household income, supported housing demand in India during the pandemic.
intended to fund the construction and operation of metro rail projects in these
cities. The Maharashtra government has estimated that the cess will generate Recent trends in India’s residential market
an annual revenue of INR 700-800 crore.
140
As of August 2023, the Maharashtra government has collected over INR 1,800
crore as metro cess from property registrations in the state. This is more than Demonetisation
double the annual revenue target of INR 700-800 crore that the government 120

had set for the cess. The maximum metro cess revenue has been collected in
Mumbai, which is home to the largest metro rail project in the state. Over INR 100
1,200 crore has been collected from metro cess in Mumbai, followed by Pune
Index

(INR 536 crore) and Nagpur (INR 60 crore).

80

RERA and GST Implementation

Rs. 1,800
60
COVID 19 Pandemic
40
Maharashtra government has collected over Rs. 1,800 crore as
Dec-15

Dec-18

Dec-19

Dec-20

Dec-21

Dec-22
Dec-16

Dec-17
Jun-15

Jun-18

Jun-19

Jun-20

Jun-23
Jun-21

Jun-22
Jun-16

Jun-17
metro cess from property registrations in the state.

Source: Knight Frank Research; Note: Residential sales across top 8 cities in India, 2. Index = Average of half yearly residential sales between 2015 – 2019
Economic performance remains a strong long-term factor as low interest rates, stamp duty concessions, improving
for influencing appetite for real estate in the country. sentiment of the consumers towards home ownership, and Changing trends in housing demand in India
Between 2010-2012, the residential demand in India sharp salary growth in the high paying IT/ITeS sector led
<5 mn 5-10mn 10mn>
remained strong, supported by a healthy economy wherein to an accelerated revival in residential demand in India. In
the real GDP grew at an average rate of 6.5%. Between 2021, 2,32,903 residential units were sold across the top 8 100%
90% 16% 18% 20% 21%
2013 and 2017, however, factors such as the sharp rupee markets in India. Despite an aggressive rise in the interest 27% 30%
depreciation, inflationary pressures, and structural changes rates in 2022 and 2023, when the RBI raised the repo rate 80%
in the economy which had a direct impact on the real by 250 bps and the base lending rates by 150 bps, the 70% 30%
33% 35%
estate sector such as demonetisation, GST implementation momentum in India’s residential demand continued to 60% 37%
36%

Share (%)
etc, slowed down the residential demand in India. The remain strong. In 2022, 3,12,666 residential units were sold 50% 38%
slowdown was further accentuated by the outbreak of across the top 8 cities in India. 40%
the COVID-19 pandemic in 2020, as economic activities 30%
54% 48%
globally came to a stall. However, post pandemic, in 2021, 20% 45% 42% 37% 32%
the residential demand recuperated strongly. Factors such 10%

Residential sales in India 0%

2018 2019 2020 2021 2022 H1 2023

Residential sales Real GDP (%YoY) Source: Knight Frank Research; Note: Residential sales across top 8 cities in India, 2023 data is till June 2023

4,00,000 12.0
10.0
3,50,000
8.0 Affordable housing market
6.0
3,00,000 The scarcity of affordable housing in India is primarily concentrated in the economically weaker section (EWS) and low-
4.0
In Units

income group (LIG) households, posing policy challenges to the central government. In the early years of India’s economic

% YoY
2,50,000 2.0
development, the emphasis on housing for poor was laid in the rural areas of India. However, in 2007, the government
0.0
2,00,000
of India introduced The National Urban Housing and Habitat Policy (NUHHP) with an intent to promote public private
-2.0 partnerships for realising the objective of “Affordable Housing for All”. The NUHHP promoted policy measures such as
-4.0 reserving 10-15% land and 20-25% of floor area ratio (FAR) in new housing projects for affordable housing. This provided
1,50,000
-6.0 an opportunity for the private developers to participate in infusing supply of affordable houses in India. Over the last few
1,00,000 -8.0 years, policies such as the Rajiv Awas Yojana (RAY), Rajiv Rinn Yojana (RRY) – which later changed to Credit Linked Subsidy
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

H1 2023
Scheme (CLSS), Affordable Housing in Partnership (AHP) and Pradhan Mantri Awas Yojana (PMAY) were introduced by
the government with the objective of making provision for affordable housing for the urban poor in India. In 2015, the
Source: RBI, Knight Frank Research; Note: Residential sales across top 8 cities in India, 2023 data is until Jun 2023 government launched PMAY-U with provisions such as tax rebates, monetary support, relaxed development regulations,
discounted interest rates with an objective to provide “Housing for all” by 2022. Overall, under PMAY-U, the government
had sanctioned 1.19 crore units of housing under the affordable segment. The cumulative budgetary allocation by the
central government from FY 2016 to FY 2024BE is estimated to be INR 4,011 bn to cater to the demand.

Central government budget allocation for PMAY since 2015

Progress of PMAY-U since
Growing demand for luxury housing: inception in 2015 Units in lakhs
1000
900
Thus far, India has been largely categorised as a low-middle income 900
796
country. Therefore, the housing demand for most of the last two decades 800
771
Completed 76
was concentrated around affordable housing (under INR 5 mn) and mid- 700
segment housing (between INR 5-10 mn). However, in the last few years,
600
there has been a shift in the ticket size of the housing demand, with growing
INR billion

500
Grounded 113
income levels primarily driven by generation of high salaried jobs emerging 403
400
from the IT/ITeS, BFSI and other service sectors,. While the mid-segment 312
300 254 250
housing market continues to dominate the demand, there has been a 210 Sanctioned 119
growing demand for luxury housing (above INR 10 mn). In 2018, across 200
116
the top 8 cities in India luxury housing comprised 16% of the total sales. 100

In 2022, the share of this segment significantly increased to 27%. Going 0 Demand 112

2023-24BE
2020-21

2021-22
2017-18

2018-19

2019-20
2015-16

2016-17

2022-23RE
forward, factors such as growing economy, salary growth from the high
paying services sector and growth in numbers of HNIs and UHNIs, will Source: Ministry of Housing and Urban Affairs. Knight
continue to raise demand for luxury housing in India. Source: GoI, Knight Frank Research
Frank Research. Note: Data is until 11 Aug 2023.
Affordable Rental Housing In India shift towards mid segment and luxury housing. The share
of lower income households will reduce from existing 43%
In 2020, amid the COVID-19 pandemic, the central currently to 9% in 2047. Thus, a significant share of the
government launched “Affordable Housing Rental population will shift to lower middle and upper middle-
Complex” (ARHCs), a sub scheme under the Pradhan income categories. This will enable a significant demand
Mantri Awas Yojana – Urban (PMAY-U). The objective of for mid-segment housing. Additionally, the share of HNIs
the scheme has been to provide rented accommodation and UHNIs households in India which will likely increase
at an affordable rate for poor migrants to cities due to from existing 3% to 9% in 2047 will generate a significant
the reverse migration triggered by the pandemic. As per demand for luxury housing in India . In terms of market
the economic survey 2016-17 migration doubled from 5-6 value, the estimated residential demand has a potential to
million a year during the 2001-11 to nearly 9 million 2011-16. generate an output equivalent of USD 3.5 trn in 2047.
Owing to the fast pace of economic growth along with the
increasing employment opportunities in urban centres, by Household income evolution In India
2047, an estimated 51% of India’s population is likely to be
living in urban centres. According to the technical report by
MHUPA (Ministry of Housing and Urban Poverty Alleviation), 1M 8M 29M
High Income
the urban housing shortage in India is estimated to be (1%) (3%) (7%)
approximately 19 mn and is further estimated to widen
to 38 mn homes by 2030. Owing to house ownership
challenges primarily due to unaffordability especially in the

Commercial Real Estate

Upper mid Income 16M 61M 168M
economically weaker section and low-income groups, the
(7%) (21%) (44%)
demand for affordable rental housing is poised to grow.
Thus, the catering to the growing demand for affordable
rental housing is an opportunity for the private developers
51M 97M 132M In recent years, India’s commercial real estate market has supporting India’s office real estate and are expected to
and the policy makers to create an equitable economic Lower mid Income
(23%) (33%) (34%) grown stronger with increasing global occupier interest and continue this support. Additionally, the evolving start-up
growth by integrating infrastructure, social welfare, and
urban development. the rise of small and medium real estate land developers. ecosystem supported by government policy initiatives in
Additionally, growing institutional capital investments India has been driving the office real estate sector over the
has acted as a catalyst for the sector. Over the last few last few years.
Low Income 151M 1527M 57M decades, India has emerged as an IT destination of choice
Estimating Residential Demand for 2047 (69%) (43%) (15%) for global technological companies, and the requirement
India’s population is expected to surge to 1.7 bn in 2047 for office space to cater to the service requirements has
2005 2018 2030 been one of the key enabler of commercial real estate in
with close to 51% of the individuals residing in the urban
Forecast India.
centres . Additionally, there is also a scope for existing
rural and small towns to transform into mini-urban towns. Source: World Economic Forum
Additionally, government initiatives such as the
Burgeoning urban population will generate the demand for Estimation of share of households across different establishment of special economic zones (SEZs), software
housing in India, especially in the urban cities. As per our income groups
estimates, to accommodate the urban population, urban
technology parks (STP), and export oriented units (EOU)
Policy support to
have significantly supported India’s CRE. Leading global
cities in India would require 230 mn housing units by 2047. 100%
0.5% 3%
8% multi-national companies such as Amazon, Google etc. commercial real estate
7% 9%
The scale of development would significantly transition to 90%
21% having one of their largest operating base in India and in India
integrated townships, mixed used housing developments, 23%
80% the country’s thriving start up ecosystem has induced
developments linked to economic activity, self-sustaining
70% 44% demand for commercial real estate in India. It has enabled
mini townships etc. 50%
Startup India Action Plan, 2016
60% 33% the development of robust office infrastructure to support
Furthermore, with the changing income profiles, the 50% the growth of economic activity in the country, generate
demand for housing will emerge across all the segments. 40% large-scale employment for the blue and white collared
69%
In the next few years, while the demand for housing will 30% 34% workforce along with creating opportunities for real estate- Atal Innovation Mission, 2016
31%
remain concentrated in affordable housing, it will gradually 20% 43% focused start-ups.
10%
15%
9% While the CRE and primarily the office sector in global
0%
economies has been under severe stress post pandemic Startup India seed fund scheme, 2021
2005 2018 2030E2 2 047E
due to the sharp rise in inflation and interest rates, India’s

230 mn
Low Lower Mid Upper Mid High
office market has continued to remain strong. In 2022, the
top 8 cities in India registered office transaction volume of
Source: World Economic Forum, Knight Frank Research Digital India BHASHINI, 2022
housing requirement in 2047 52 mn sq ft. Growth in the IT/BPM sector as well as non-IT
World bank estimates
2

3
Low Income: <$4,000, Lower-Mid: $4000-8500, Upper-Mid: $8,500-40,000, High sectors such as BFSI, healthcare, and business consulting
Income:>$40,000 basis income per household per year in real terms, Source: World
Economic Forum and rise in flexible and co-working spaces, are key factors
Office transactions across top 8 cities in India
70.0

60.0

50.0

40.0

30.0

Multi Modal
20.0
Logistic Hub

10.0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

H1 2023
Source: Knight Frank Research; Note: Office transactions across top 8 cities in India, 2023 data is till June 2023

1,000
Supported by the aforementioned growth indicators, the
Incremental office stock in India
stock of office real estate in India has significantly grown
in the last few years. In 2008, the top 8 cities in India
cumulatively accounted for 278 mn sq ft office stock; 900
this has now increased to 898 mn sq ft. The expansion Integrated
of office stock is not limited to Tier 1 cities alone. In Logistic Park
the last few years, Tier 2 and 3 cities in India have also
witnessed a rapidly rising demand and supply for office
800
real estate in India. Factors such as business expansion,
low costs, infrastructure development, rise of IT and the
service industry, availability of talent etc are some of key
drivers of growth in office stock in Tier 2 & 3 cities. The
700
aforementioned factors along with increase in formal

Evolution of warehousing sector in India

workforce in India will generate the demand for adequate

Trends in India’s
mn sq ft

volume of office space in India. As per Knight Frank Warehouse

estimates, when the India’s economy is likely to expand
US$ 36tn in 2047, 69% of the working population will be 600

warehousing sector
formally employed. The requirement of office stock to
accommodate the burgeoning economic activity and the
formal employment will significantly grow in the next few
years; and have a potential to generate output equivalent to 500 Over the last few decades, India’s warehousing sector has witnessed a
USD 473 bn in 2047 tremendous shift from being dominated by unorganized players to gaining
global investments. The sector has witnessed growth emerging from India’s
Number of government recognized startups growing domestic consumption, booming organized retail, government
from financial year 2016 to 2022 400 policies and regulatory measures, and strengthening supply chain triggered
by the COVID-19 pandemic. Augmented foreign trade, FDI allowance in the
25000
manufacturing and retail sector, globalization and changing tax systems are
20160 some of the other key factors leading to a transformation in India’s warehousing
19500 300
20000
Godown sector. In the early years, managing transportation network and storage of
finished goods defined the supply chain strategy for most companies in India.
14596 However, integration of the Indian economy with the global economy and
Number of a startups

15000
government initiatives and policies to promote manufacturing in India has
11417 200
elevated the logistics and warehousing industry in India. Central government
10000 8775 initiatives such as Warehousing (Development and Regulation) Act, 2007,
development of Free Trade and Warehousing Zones (FTWZ), (Foreign Trade
5233
5000 Policy, 2004-09), establishment of Multi Modal Logistics Parks, National
100
Logistics Policy (NLP) 2022, etc have provided impetus to the warehousing
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

H1 2023

471 market in India. Structural economic changes such as the implementation of

0
2016 2017 2018 2019 2020 2021 2022
GST in 2017 also accelerated the formalisation of the warehousing sector in
Source: Knight Frank Research; Note: Office stock across top 8 cities in India,
Source: DPIIT, Knight Frank Research 2023 data is till June 2023 India which is now an attractive sector for the institutional investors.
 Policy and regulations
India’s rank in global Logistics Performance Index

Policy Objective
70 60 50 40 30 20 10
2007 Warehousing (Development  To make provisions for the development and regulation of warehouses, negotiability
39 and Regulation) Act, 2007 of warehouse receipts, the establishment of a Warehousing Development and
2010 Regulatory Authority (WDRA) and related matters.
47
 The Negotiable Warehouse Receipts (NWRs) issued by the warehouses registered
2012 46 under this Act was intended to help the farmers to seek loans from banks against
NWRs, and avoid distress sale of agriculture produce.
2014 54

35
2016 Free Trade and Warehousing  Governed by the SEZ Act 2005 and SEZ Rules 2006, the objective was set to provide
42 Zone (FTWZ), (Foreign Trade quality infrastructure including warehouses, commercial office space, handling
Policy, 2004-09) and transportation equipment and facilitate a one-stop-clearance for import and
2018
38 export of goods. FTWZ is positioned as a logistics and distribution centre and by
integrating various aspects of logistics operations, it enables an efficient operational
2023
Source: World Bank, Knight Frank Research environment for trade facilitation.
Multi Modal Logistics Park,  The objective of the initiative is to foster intermodal connectivity through railways lines
2017 and access to highways, connectivity to seaports and airports for efficient movement
The warehousing market in India has long been considered of goods.
In the early years, the warehousing sector in India was an attractive investment opportunity, given the growing
needs of a massive consumption market and the The initiative involves development of 35 MMLPs across India under the “Bharatmala”

largely dominated by local and Grade B developers.
aggressive economic growth targets of the government. program.
However, the growth in organised retail and warehousing
needs of sophisticated sectors such as pharmaceuticals, The focus on increasing the manufacturing sector’s share National Logistics Policy,  The objective of the policy is to establish India as a global logistics hub by integrating
cold storages, automotives etc have expedited the need of GDP to 25% by 2025 and transforming India into a 2022 its various transportation infrastructure and services. The policy also aims to reduce
for quality warehousing structures in India. As a result, the global design and manufacturing hub via the ‘Make in logistics costs which is currently equivalent to 14% of the country’s GDP. The key
footprint of Grade A developers in the warehousing sector India’ initiative is also a major driving force behind the objectives are: to improve transport infrastructure and connectivity, promote usage
has grown, especially in the last few years. As per the interest in the warehousing market. Factors such as rise of of technology and automation, enhance last mile connectivity, and encourage private
assessment made by Knight Frank research, the share of e-commerce, growth in manufacturing, and government investments.
Grade A warehousing stock across the top 8 cities in India focus on infrastructure are some of the key drivers of the
Going forward, favourable economic policies, growing consumerism, industrial development, and buoyancy in India’s
has increased from 35% in FY 2020 to 40% in FY 2023. warehousing and logistics market in India. Supported
manufacturing sector will continue to support the warehousing market in India. Apart from manufacturing, sectors like
by aforementioned factors, 6.4 mn sq m of warehousing
organized retail, cold storages, automotives, pharmaceuticals and life sciences –which have evolved radically, will further
transactions were recorded across Tier 1 and 2 cities in
provide impetus to the warehousing sector in India. With the consumption wave going beyond Tier 1 cities, Tier 2 & 3 cities
India.
will also witness a massive warehousing demand in India. Spurred by the high degree of correlation between the economic
growth and increase in income levels, India’s warehousing market is likely to witness a potential demand for 159 mn sq ft by
Grade A warehousing stock expands its Warehousing transaction volume across the year 2047, registering a compounding average growth rate of 4% annually. India’s warehousing sector has a potential to
market share Tier 1 & 2 cities in India generate an output equivalent to USD 34 bn in 2047.
Grade A Grade B
In terms of evolving trends, technology adoptions will play a prominent role in enhancing India’s warehousing sector.
80 Advance technologies such as automation, robotics, artificial intelligence (AI), augmented reality (AR), and virtual reality
68 69 (VR), are already making a significant contribution to the sector’s development.
70

60 54
50
50
Potential warehousing transaction volume in 2047E (mn sq ft)
43
159
mn sq ft

40
31
30

20 14
10 72

0
14
FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

FY 2023
FY 2022

Source: Knight Frank Research

2017 2023E 2047E

Manufacturing led growth push: An Impetus to industrial development

In the recent years, countries globally have been trying to diversify their manufacturing dependency on China. Factors
such as trade and geo-political tensions, technological advancements have been pushing the companies to seek an
alternative manufacturing hub and diversify their supply chain. This trend was further accentuated with the COVID-19
pandemic. Post COVID-19 pandemic global companies have been trying to adopt China plus one strategy, i.e. countries with
potential manufacturing hub apart from China. As a result, several countries, including India have emerged as the potential
markets. India has an advantage of – favourable demography which has about 63% of the working age population, relatively
cheap labour cost, along with policy campaigns like “Make in India”. Supported by these aforementioned factors, India’s
competitive advantage as a global manufacturing hub has improved over the last few years.

Also, India’s improvement as an attractive investment destination has improved over the past few years. Government’s
strong initiatives to scale up manufacturing in the economy to cater to both domestic as well as international trade needs
will be of a significant contribution to the economy. By 2047, at an average pace of growth, India’s manufacturing sector is
likely to contribute 32% to the country’s economic growth. However, this quantum growth requires expansion of industrial
infrastructure for the economy, for which land is the pre-requisite. As of 2021, 5 lakh hectares of land in India has been
under usage for industrial purpose which comprises of 3,989 special economic zones, Industrial parks and estates etc.
However, to cater to the manufacturing activities in the economy in the next 25 years, an estimated 102 lakh hectares of
land needs to be allocated for industrial activities in India. The exponential growth in required industrial land has a capacity
to generate a revenue equivalent to USD 110 bn in 2047.

Contribution of India’s manufacturing sector to

total economic output

35.0%
31.7%

30.0%

25.0%

20.0% 18.8%

14.7%
15.0%

10.0%

5.0%

Industrial land requirement in 2047

0.0%
2022 2030E2 E2047E

Source: GoI, Knight Frank Research 120

102
100

80
lakh hectares

60

40

20 14
5

0
2021 2030E2 E2047E

Source: GoI, Knight Frank Research;

 In 2022, the top 8 cities in India featured 271 operational
malls. Developer participation in mall development too has
shifted over the years. Prior to 2010, mall development was
Key policy initiatives
dominated by prominent Grade A developers as they were
developed on prime land parcels in prominent localities
2006 of the city. 39% of the existing operational malls which
51% FDI allowed in single brand with prior were developed before 2010 are by Grade A developers.
approval from DIPP Between 2011-17, the concept of neighbourhood malls and
small shopping centers encouraged Grade B developers to
2012 also enter the shopping mall landscape in India. However,
100% FDI allowed in single brand retailing with post 2018, due to the growing demand for quality malls to
prior approval from DIPP; 51% FDI allowed in attract organized retailers, Grade A developers continued
multi-brand retailing to expand their footprint, comprising 45% of all the existing
operational malls across the top 8 cities of India.
2015
Single brand retailers allowed to sell products Besides shopping malls, high streets in India also comprise
online without approval a significant share in India’s retail real estate landscape.
As per Knight Frank assessment, 30 high streets across
2021
the top 8 cities in India accounted for a total retail area
RBI announced plans for new framework for retail
of 13.2 mn sq ft of which 5.7 mn sq ft comprised modern
digital payments in offline mode to accelerate
retail area. The presence of retailers on high streets is as
digital payment adoption in the industry. Andhra
important as shopping malls. This assessment is derived
Pradesh government announced Retail Parks
from the fact that the per sq ft consumption on high streets
Policy 2021-2026
at USD 4,099 per sq m per annum (USD 44,122 per sq ft per
annum) exceeds that of the shopping mall at USD 1,273 per
sq m per annum ( USD 13,703 per sq ft per annum). In terms
of performance, high streets with easy access to transport,
parking facilities, store visibility and spending quotient etc.
have performed better.

Growing share of organised retail consumption to support

retail real estate in India

As per Knight Frank estimates, organized retail

consumption is currently estimated to be at 4.6% of the

Retail Real Estate

total private consumption of individuals. This is significantly
Mall supply distribution by grade
smaller when compared to developed markets such as the
US, where retail consumption comprises 40% of the total
Grade A Grade B Grade C
private consumption of individuals. However, with growing
The concept of malls in India is relatively new in comparison to the developed markets. Ansal Plaze, India’s first mall was income levels and the increasing propensity of households
launched in 1999 in Delhi, followed by Crossroads in Mumbai and Spencer Plaza in Chennai. Until the Global financial 100%
in India to consume, by 2047, when the size of the Indian
crisis (GFC) in 2008, malls in India, witnessed a rapid growth multiplying across metro cities such as Mumbai, Delhi, 90% economy is estimated to be USD 36 trn, the share of retail
25% 26%
Kolkata, Bengaluru, Chennai, Hyderabad, Pune and Tier 2 cities like Gurugram, Noida, Ghaziabad etc. Prior to 2008, the 80%
34% consumption is estimated to be 37% of the total private
improving standard of living of the Indian population and their willingness to spend money had been a huge impetus to the consumption. This quantum of consumption boost will
70%
Percentage Share (%)
development of shopping malls in India during this period. Additionally, the policy initiative of allowing FDI in retail business support the entry and expansion of retailers in India, and
60% 29%
had led to the entry of foreign retailers into the Indian market which further boosted the developer sentiment to establish 37% provide an impetus to the retail real estate both for the
shopping malls in India. However, with the onset of recession in 2008, the shopping mall industry witnessed a massive 50% 27%
shopping malls and for the high streets.
setback as investors and developers faced debt challenges. This led to a shift in the structure of shopping malls in India, as 40%
it emphasized the need to adopt organized, management strategies to support the growth of shopping malls. 30%

20% 45%
In 2011, India witnessed a major facelift in the structure of shopping malls. The concept of shopping malls was no 39% 38%
longer limited to retail shopping alone, it started to transition into an integrated commercial space with branded stores, 10%
entertainment and gaming allies, multiplexes, food joints and more. Thus, malls in India were transitioning into an 0%
experiential center inclusive of shopping experience. Before 2010 Between 2011-2017 After 2018

ource: Knight Frank Research, Note: Data is until 2022

The following Ranking Table encapsulates the ranking of the 30 High Street markets that emerged as per the scoring in the
performance indicators discussed above.

11 21
Mahatma Gandhi Road (MG Road)

Mumbai Pune
Lokhandwala Market Mahatma Gandhi Road (MG Road)
22
12

Top 10 Delhi
Connaught Place
Pune
Koregaon Park

High Street
23
Bengaluru

13
Pune
Ahmedabad
Baner Road
S.G.Highway
in India
Hyderabad
Somajiguda

24
14
1
South Extension - I & II

Mumbai
Bengaluru
Linking Road

Colaba Causeway Market

Indira Nagar - 100 Ft Road
Mumbai

2 25
Park & Camac Street

15
Chennai
Bengaluru
3 Nungambakkam High Road
Jayanagar – 4th Block
Delhi

26
Kolkata

16
4 Hyderabad Mumbai
Anna Nagar

Lower Parel
Commercial Street

Gachibowli
Chennai

5 17 27
Bengaluru

Hyderabad Delhi
Sector 18 Market

Ameerpet Khan Market

6
18

Real Estate :
28
Noida

7 Hyderabad Delhi
Brigade Road
Bengaluru

Banjara Hills Lajpat Nagar

Investments and More

8
Church Street

19 29
Bengaluru

“
Hyderabad Bengaluru
Bangalore has four high streets
9 Jubilee Hills Koramangala -100 Ft and 80 Ft Road
in the top ten
“ 20 30 Nifty Realty Index Now and Beyond
10 Ahmedabad Gurugram
Chimanlal Girdharlal Road (CG Road) DLF Galleria The Nifty Realty Index was instituted to serve as a benchmark for assessing the performance of India’s real
estate sector, primarily encompassing businesses engaged in the construction of both residential and
Source: Knight Frank Research
commercial properties. Launched on 30th August 2007 with a base date of 29th December 2006, this Index was
crafted to monitor and record the price fluctuations exhibited by the ten largest real estate enterprises listed on
the National Stock Exchange of India (NSE).
Share of organised retail in total private consumption of the households

40%
37.0%
The launch of the Nifty Realty Index was
Portfolio Characteristics a significant development for the Indian
35%
real estate sector. It offered investors
Methodology Periodic Capped Free Float a heightened level of transparency and
30%
Percentage Share (%)
Percentage Share (%)

No. of Constituents 10 ease in monitoring the sector’s progress,

25% enhancing the prominence of real estate
Launch Date 30th August 2007
stocks within the investment landscape.
20%
16.0% Base Date 29th December 2006 As a result, liquidity in real estate stocks
15% Base Value 1000 saw an upsurge, rendering them more
appealing and enticing to potential
10% Calculation Frequency Real-Time
investors.
4.6% Index Rebalancing Semi Annually
5%
1.3%
0% Source: NSE
2016 2023E2 E2 030E 2047E
Source: Knight Frank Research
Top constituents by weightage
Nifty Realty Calendar Year Returns

Company’s Name Market Cap (INR bn) Market Cap Weight (%)

110%
DLF Ltd. 1,193 Large Cap 25.82

73%

71%

54%
53%
Godrej Properties Ltd. 423 Large Cap 15.95

28%

23%
10%
Macrotech Developers Ltd. 672 Mid cap 14.71

5%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Phoenix Mills Ltd. 305 Large Cap 12.93 YTD

-11%
-15%

4%
-
-26%
Oberoi Realty Ltd. 392 Large Cap 10.48

-33%
-34%
-52%
Prestige Estates Projects Ltd. 224 Large Cap 6.64

-83%
% Returns
Source: NSE
Brigade Enterprises Ltd. 137 Mid cap 5.93

Mahindra Lifespace Developers Ltd. 80 Mid cap 3.09 Since its inception, the Nifty Realty Index has showcased an impressive 73% surge in growth for its debut year. However,
following its record high of 1,878 on January 14, 2008, the Index experienced a downturn which was attributed to the
Indiabulls Real Estate Ltd. 35 Mid Cap 2.65 severe impact of the global financial crisis on housing demand. The shockwaves of the collapsed US housing bubble were
felt across the real estate market worldwide. Escalating interest rates and the economic deceleration compounded the
Sobha Ltd. 54 Mid cap 1.8 negative sentiment among investors.

In terms of annual returns, the Nifty Realty Index has achieved positive outcomes in 8 instances since its initiation in 2007.
Total 3,515 - 100 Notably, even during the pandemic-ridden year, the Realty Index surprised investors by attaining 5% growth throughout
the year. This surprising growth was facilitated by the government’s stimulus measures that supported the economy and
kindled demand for real estate. The prevalence of low interest rates rendered homeownership more affordable, driving
Source: NSE. Data as on 11th August 2023
demand. The escalated demand for budget and mid-segment homes led to a price increase in these sectors.

Comprising 10 large and mid-cap real estate firms listed on the National Stock Exchange of India (NSE), the Nifty Realty Presently, on a Year-to-Date (YTD) basis, the Index demonstrates a favorable growth of 23%, underpinned by robust
Index functions as a stock market indicator for the sector. The allocation of weight to each constituent within the Index is residential demand.
contingent upon its market capitalization. Regular rebalancing occurs every quarter to maintain the Index’s accuracy in
reflecting the progress of the 10 foremost real estate companies operating in India. Index Returns

Index Returns (%) 3M 6M YTD 1Y 2Y 3Y 4Y 5Y 10Y

Nifty 50 6.2 8.8 7.3 10.0 19.3 71.6 74.9 70.0 249.1
Nifty Realty Performance Nifty Auto 11.4 16.2 21.9 19.0 51.7 101.5 115.5 41.9 254.0

2000 Nifty Bank 1.7 6.4 2.8 13.7 23.4 98.9 55.5 57.2 350.3

1800 Nifty Fin Services 1.6 6.5 3.9 9.7 15.0 78.8 54.4 67.6 372.2

1600 Nifty Energy 8.4 18.1 1.9 -1.1 35.9 69.2 86.3 71.5 249.6
1400
Nifty FMCG 5.1 12.9 16.3 20.9 41.0 61.7 75.3 63.2 205.7
1200
Nifty Infra 10.3 18.3 14.3 20.5 33.7 87.8 95.5 91.7 191.4
1000
Covid Pandemic Nifty IT 9.7 -0.2 7.7 1.9 -2.7 70.7 94.8 110.0 295.0
800 Sub Prime Crisis
Nifty Media 27.9 16.9 10.4 6.2 30.7 61.0 20.0 -24.2 36.6
600
Nifty Pharma 22.3 24.6 21.9 18.0 7.5 30.4 93.8 68.0 124.0
400
Nifty Metal 15.4 15.9 -0.5 16.2 16.4 182.2 178.9 94.7 287.6
200

0 Nifty Realty 16.9 28.1 23.0 20.6 35.0 154.6 99.9 95.1 234.9
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Nifty Services 3.4 3.5 -0.2 2.3 8.4 68.8 53.9 60.1 267.9
Source: NSE
Source: NSE. Data as on 11th August 2023
Over the past decade, the Nifty Index has marked an impressive total return of 249%, while the Nifty Realty Index has
notched up a total return of 235%. While the Nifty Index has displayed superior returns over the long term, it is worth noting
that in the last five years, the Nifty Realty Index has outshone its larger counterpart, delivering markedly better returns.

Notably, the Nifty Realty Index has outperformed various major sub-indexes within the last year. This feat has been fueled
by a strong supply side eco-system and a surge in demand for real estate in India driven by factors such as a growing
population, increased household disposable income, and government policies supporting affordable housing. Real estate
companies have caught this rising tide, performing remarkably well with robust sales and profits, effectively bolstering the
Index’s growth.

Nifty Realty in the next 25-years

Looking ahead to the next 25 years, the Nifty Realty Index is poised for significant growth, fueled by
a convergence of compelling factors:

Rising Housing Demand: T

R E I
India’s swift urbanization trajectory is set to propel the urban population to a projected 600 million India Real Estate Investment Trust (REITs)
by 2050. As urban centers burgeon, there will be an unprecedented demand for housing. The real

REITs Unveiled:
estate sector is strategically positioned to cater to this escalating need.

Rising Disposable Income:

The middle class in India is on a rapid ascent, accompanied by an augmentation in household

disposable income. This economic uplift will render a larger portion of the population financially
capable of acquiring homes, thereby intensifying the call for real estate properties.
Reshaping Real Estate Investments
Government Boost: In course of financial evolution, the Securities and Exchange Board of India (SEBI) first introduced its draft REIT regulations
in 2007, and after considerable revisions, the Real Estate Investment Trusts Regulations, 2014 (REIT Regulations) were
The Indian government’s proactive stance in nurturing the real estate industry is expected to
enacted in India on 26th September 2014. The inaugural REIT, Embassy Office Parks, was listed on the Exchange in April
catalyze its growth. Initiatives like tax incentives for homebuyers and subsidies for affordable
2019. Following suit, Mindspace Business Parks REIT got listed in August 2020, Brookfield India Real Estate REIT in early
housing are poised to stimulate demand and investor confidence.
2021, and Nexus Select Trust REIT in 2023.
Developers with stronger balance sheets and execution capabilities:
The performance of Indian REITs since Inception
Several large developers have emerged in India in recent years with strong balance sheets and the
ability to execute large projects on time and within budget. This has helped to improve the quality Price change Annual
Company Sector Issue date Issue Price YoY*
and reliability of supply in the market. since Listing* Yield

Technological Advancements: Embassy Office Parks REIT Office 5th Apr 19 300 -17.5% 0.7% 6.9%

The real estate sector is undergoing a digital metamorphosis, embracing technology to streamline Mindspace Business Parks REIT Office 7th Aug 20 275 -17.1% 3.9% 6.5%
operations and enhance customer experiences. This modernization not only augments efficiency
Brookfield India Real Estate Trust Office 19th Feb 21 275 -26.3% -3.6% 8.1%
but also amplifies the sector’s appeal to potential investors, thus acting as a driver for its expansion.
Nexus Select Trust Retail 19th May 23 100 NA 16.0% NA
Considering this confluence of factors, the Nifty Realty Index is set to script a compelling growth
narrative over the coming quarter-century. *Data as on 10th August 2023

REITs have emerged as a major driving force in revitalizing the real estate industry of India. The advent of REITs has infused
essential liquidity into the market, enticing both local and international investments, thereby fostering progress and
advancement of the real estate sector. Through their methodical strategy of pooling resources and investing in revenue-
generating properties, REITs have offered investors a convenient and varied path to engage in the real estate domain. This
has also played a role in increasing transparency and elevating the standards of corporate governance besides offering an
exit to real estate developers that are into building projects involving a long gestation period and huge capital expenditure.
Indian Office REITs portfolio Globally, the performance of Real Estate Investment comparable trend is evident in the realm of retail assets
Trusts (REITs) has taken a downturn since last year as the where malls are experiencing a surge in foot traffic,
Office Portfolio (mn sq ft) Mumbai Hyderabad Pune Chennai NCR Kolkata Bengaluru Chandigarh rising geopolitical uncertainties have impacted consumer driving increased asset utilization.
sentiments. The FTSE EPRA Nareit Global REIT Index, a
Embassy Office Parks REIT 2.0 - 6.4 - 3.9 - 22.0 - gauge of REITs’ fortunes in both developed and emerging • Government Support:
markets, experienced a considerable drop of 17.2% during The Indian government has displayed a favorable
Mindspace Business Parks REIT 10.5 10.1 4.3 0.9 - - - -
the year, marking the index’s most severe setback since the disposition towards the REITs sector, actively facilitating
Brookfield India REIT 1.6 - - - 9.7 3.1 - - financial crisis of 2008. its expansion within the country. This support has
Some of the factors which impacted REIT’s performance fostered an environment conducive to investment,
Nexus Select Trust - - 1.0 0.2 - - - 0.2
are as given below: particularly beneficial for office REITs.
Note: Under construction portfolio not considered
• The geopolitical turmoil stemming from the conflict in In essence, while REITs globally experienced setbacks, the
Ukraine cast a veil of uncertainty over the economic unique dynamics of India’s economy, urban concentration,
landscape worldwide, thereby influencing the and supportive policies have acted as mitigating factors,
cushioning the impact on office REITs in the country.
Nexus Select Trust Retail Portfolio (mn sq ft) confidence of investors.

Amritsar 0.5 Mangaluru 0.5 • The deceleration of the global economy caused a
plunge in desire for real estate, which in turn resulted in
Chandigarh 1.2 Hyderabad 0.8 reduced occupancy rates and rental incomes, directly Mapping the Future: India’s REIT Journey
The combined portfolio of Indian REITs encompasses 84.9
affecting REITs’ bottom lines. towards 2047
Delhi 0.5 Ahmedabad 0.9 mn sq ft, with 75.9 mn sq ft dedicated to office assets and
9 mn sq ft to retail assets. Additionally, there is ongoing • Escalating interest rates elevated the cost of capital for Rising Potential For REITs
Udaipur 0.4 Indore 0.4 construction of approximately 21.3 mn sq ft within the REITs REITs, impinging on their ability to secure funds for new
sector, projected to reach completion within 1-2 years. ventures. The fallout resulted in diminished profitability Types of REITs listed globally.
Bengaluru 1 Mumbai 1
and subsequently, deflated stock valuations.
13 Specialty
Mysuru 0.3 Pune 0.4
• Mounting inflation eroded the earnings of REITs as they
Chennai 0.7 Bhubaneswar 0.4 grappled with escalated expenses for rentals, property 12 Gaming
levies, and sundry outlays. The ramifications extended
Source: Company Filings
to curtail stock values as well.
11 Data Centres
Global Recognition: Indian REITs Making Their Mark
While REITs across the world felt the impact on their
returns, Indian office REITs weren’t exempt from it. Infrastructure
Office Portfolio (mn sq ft) USA UK Australia Singapore China India 10
Nonetheless, the repercussions of the global turmoil were
GDP (USD bn) 25,460 3,130 1,606 591 18,100 3,390 contained within certain boundaries when it came to the
9 Timber
Indian office real estate sector.
First REIT Launch Year 1960 2007 1971 2002 2001 2019
Several factors contributed to the relatively lower impact on
8 Self Storage
No of REITs 206 56 46 42 28 4 office REITs in India compared to their global counterparts.

REITs Market Cap (USD bn) 1,226.1 65.9 90.3 77.5 4.7 8 • Robust Domestic Health Care
7

Market Cap/GDP 4.8% 2.1% 5.6% 13.1% 0.0% 0.2% Demand: India boasts a substantial and continually
expanding economy, resulting in a pronounced need for 6 Hotel REIT i) Lodging/Resorts
*Data as on 10th August 2023
Within the global landscape, the USA secured its position office spaces. This heightened demand has acted as
Performance of Office REITs Globally at the forefront as the earliest and most seasoned market a buffer, upholding the value of office properties within 5 Diversified
for REITs, commanding the highest count of REITs. the country even during times of worldwide economic
i) Apartments
REIT Portfolio Performance YoY 2023 YTD Meanwhile, a multitude of other countries ventured into the upheaval.
4 Residential ii) Manufactured Homes
realm of REITs between 2000 and 2010. India unveiled its iii) Single Family Homes
USA -29.6% -8.9% • Office and Retail Revival:
inaugural REIT in 2019, achieving its milestone nearly 59
i) Shopping Centres
years after the USA’s first REIT listing. In the aftermath of the pandemic, a resurgence of 3 Retail
UK -30.8% -16.8% ii) Regional Malls
iii) Free Standing
normalcy has emerged, underscored by the decreasing
Over the last 5-10 years, many countries have broadened
Australia -22.6% -9.1% prevalence of remote work. Particularly striking is 2 Office
their REIT portfolios to encompass diverse assets such
the notable revival of office spaces as employees
Singapore -42.6% -21.3% as office spaces, retail properties, and industrial facilities.
gradually reintegrate into physical work environments.
India’s current REITs cover office and retail sectors; 1 Industrial
India -19.9% -10.6 This transition has yielded heightened usage of
however, the trajectory suggests expansion of REITs into
assets within Real Estate Investment Trusts (REITs). A
additional sectors in future.
Data as on 10th August 2023
Number of different types of REITs listed in countries.

Number of Types of REITs USA UK Australia Singapore India

No. of REIT segments 13 11 6 4 2

Source: Knight Frank Research

Over the last 3.5 years, India has witnessed the introduction With the initial successful REITs setting a positive
of four REITs which have focused on the office and precedent, it is probable that REITs will expand into diverse
retail sectors. Despite these developments, the market sectors such as industrial and logistics, in addition to
capitalization to GDP ratio for Indian REITs remains at a continued growth in the office and retail domains in the
modest 0.2%. This suggests a potential for substantial medium term. Inspired by global markets, developers are
growth in the REIT sector. likely to contemplate venturing into REITs for alternative
asset classes like data centers, hospitality, healthcare,
A notable opportunity lies within the office sector itself. education and more, in the longer term over the next 25
Currently, office REIT holdings constitute a mere 10.1% of years.
the total available office space in the top eight cities. This
underscores the significant room for expansion in this Rise of Fractional Ownership
sector. Moreover, prospects within the office sector will
rise as Indian real estate companies explore avenues for There has been a noticeable rise over the last 2-3 years
growth, driven by the improving economy and increasing in the number of online platforms that offer fractional
demand for office spaces. ownership of real estate assets. These platforms present
investors with the opportunity to invest in various types of
India has also witnessed the launch of its first retail REIT, properties such as buildings, office spaces, warehouses,
and the introduction of retail REITs comes at an opportune shopping centers, conference centers, and more. The
time to unlock the latent value in real estate, especially as typical minimum investment on these Fractional Ownership
the retail industry is undergoing a revival. Developers and Platforms (FOPs) ranges from INR 10 lakhs to INR 25 lakhs.

Private Equity in
investors are now focusing on building, managing, and The real estate assets that underlie these FOPs resemble
acquiring profitable retail assets. the properties described within the scope of the REIT (Real
Estate Investment Trust) Regulations.

Indian Real Estate

Positive signs of growth are also observed in India’s
industrial sector. Players in this sector are starting to
Fractional Ownership Features
consolidate their portfolios while exploring the potential
of warehousing REITs, driven by expansion activities
Opportunity to access high-quality
within the industry. In the fiscal year 2023, there was a Investment Amount
assets starting from INR 25 lakhs.
robust leasing of 51.3 mn sq ft of warehouse space across Private equity (PE) investments in the Indian real estate sector have witnessed a consistent and gradual growth
the top eight cities, primarily due to third-party logistics over the past two decades. These investments have steadily risen from USD 1.1 bn in 2004 to USD 5.3 bn in
Tenants of Grade A quality pos-
(3PL) players. Grade A warehousing facilities, known for Quality Tenants 2022. Particularly noteworthy is the sector’s robust expansion over the last decade, showcasing an average
sessing robust credit ratings.
advanced technology and enhanced efficiency, are gaining annual PE investment of USD 5.0 bn between 2013 and the first half of 2023, compared to the average annual
popularity among occupiers. With growing demand, PE investment of USD 1.9 bn observed between 2004 to 2012.
Diverse Asset Option to diversify assets across
prominent developers are likely to introduce the country’s Portfolio various classes.
PE investments in Indian real estate reached its zenith in 2007 at USD 6.9 bn. However, such investments
first industrial REIT In the next few quarters.
suffered a setback in 2008 as the global financial crisis triggered a dip in investor confidence. Consequently,
Potential for Value Prospects for growth in both rental they remained rangebound between 2008 and 2014, averaging USD 2.0 bn during this period. Nevertheless,
Embassy REIT is currently the sole holder of a hotel asset
Increase income and market value.
portfolio. However, it is only a matter of time before a the sector exhibited resilience, recovered from the global shocks, gradually rejuvenated investor sentiment,
dedicated hotel REIT is introduced in the country, once overcoming the challenges posed by the economic slowdown.
Owing to the growing value of investments involving such
regulatory issues are resolved. Hotel REITs have the
FOPs and the concurrent rise in the number of investors, Post-2014, a distinct upward trend in investments emerged with the segment experiencing consistent growth.
potential to transform the Indian hospitality industry,
the SEBI (Real Estate Investment Trust) Regulations are in This upward trajectory has been propelled by India’s sustained economic advancement, escalating demand for
boosting investment flows into this capital intensive sector.
the process of encompassing these FOPs with necessary real estate, favorable government policies such as the relaxation of foreign direct investment (FDI) policies, and
The demand for data centers and educational technology is adjustments within the regulatory purview of SEBI. This strengthening supply side, all of which collectively bolstered PE investments.
also contributing to the possibility of developers exploring strategic move is designed not only to stimulate the growth
of the real estate market but also to institute safeguards for At present, India stands as a compelling investment destination on the global landscape, underpinned by its
the REIT option in these sectors. The framework for REITs
investors, fostering a methodical advancement of both the robust economic growth and the array of attractive exit opportunities it presents to investors. Projections for
has been continually evolving to enhance transparency,
sector and the market at large. 2023 indicate that PE investments in Indian real estate are poised to reach USD 5.6 bn, reflecting a YoY growth
bolstering investor confidence.
of 5.3%.
 Investment Evolution: Private Equity’s Journey in the Indian Real Estate Landscape Mapping Private Equity Investments Across Cities
PE investments across cities
Fueled by robust demand for both office and residential
9,000 spaces, Mumbai has emerged as the primary recipient of 30,000

24,443
investments since 2004, accumulating a total of USD 24.4
8,000
bn in investments. Following close behind, the National 25,000
7,000 Capital Region (NCR) secured the second position with a
PE Investments (USD mn)

cumulative investment of USD 11.6 bn. The top five ranks 20,000

PE Investments (USD mn)

6,000
were secured with the addition of the three principal
5,000

11,653
IT hubs and emerging IT centers. Bengaluru, Pune, 15,000

10,717
and Hyderabad collectively attracted USD 20 bn in PE

9,185
4,000 7,803
7,619 10,000
6,915
6,581
investments, primarily driven by the high demand for IT-
6,199

4,836
5,107
3,000

4,296
5,357 centric spaces within these urban centers.
5,082 5,000
4,565
2,000 3,945

465

322
622
3,182
2,451 2,582
1,000 2,030 2,222 -
1,823

Mumbai

Chandigarh
NCR

Kolkata

Multiple Cities
Hyderabad

Chennai
Bengaluru

Ahmedabad
Pune
1,147 966 1,133
1.1 44
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 H1 2023

Knight Frank Research, Venture Intelligence

Source: Knight Frank Research, Venture Intelligence

Private Equity Across Real Estate Segments

Exploring Stages of Private Equity Involvement

100%

90% 100%

80% 90%

70% 80%

60% 70%

60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0% 0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 H1 2023 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Office Residential Warehousing Retail
Greenfield Ready Brownfield

Knight Frank Research, Venture Intelligence Source: Knight Frank Research, Venture Intelligence

From 2004 to 2016, private equity (PE) investments in the prominence has grown due to relaxed regulations aimed
Since 2011, private equity (PE) investors have directed a superior returns. Nonetheless, the proportion of greenfield
Indian real estate sector predominantly centered around at promoting Real Estate Investment Trusts (REITs), as well
substantial portion of their investments towards ready investments remained comparatively modest, largely due
the residential segment. During this period, the residential as the dominant presence of the global corporate delivery
assets. The repercussions of the global financial crisis to uncertainties surrounding project completions within the
space garnered a total investment of USD 19.8 bn, which centres, capturing the attention of PE investors.
in 2008-2009 created a scarcity of debt financing, residential sector.
was more than twice the USD 9.8 bn directed towards the
The post-pandemic period has also witnessed a significant significantly impacting investor confidence and steering
office sector. However, there has been a consistent decline While investor caution persisted until 2020, the post-
surge in PE investments within India’s warehousing sector. them towards a more cautious approach to investment,
in the proportion of PE investments in the residential real pandemic landscape has witnessed a shift as several
In 2022, PE investors injected USD 3.6 bn into this sector, shying away from riskier ventures. The advent of office
estate following the global economic downturn. investors have begun engaging in greenfield investments
more than double the USD 1.7 bn invested in 2021. The assets, coupled with investor preference for securing
steady returns through investments in stable yield- across sectors. This change has primarily been driven
In 2017, a notable shift in investor focus emerged, expansion of e-commerce, the evolution of omni-channel
generating assets that ensure a consistent cash flow, has by the scarcity of high-quality established assets and
redirecting attention away from residential investments retailing, and the critical role of last-mile delivery have
led to a steady upswing in investments in ready assets. the improved investor sentiment propelled by enhanced
towards office spaces, industrial/warehousing facilities, elevated the importance of the warehousing industry in
economic recovery and the anticipated growth of the
and retail real estate projects. This shift was prompted India’s growth narrative.
During this period, a significant portion of greenfield Indian economy. These factors have motivated investors
by challenges in residential ventures. Between 2017 and
investments was concentrated in residential assets, to embrace early-stage investments in pursuit of more
the first half of 2023, the office sector attracted a total
as early-stage investment in these projects allowed for favorable returns.
of USD 19.6 bn in PE investments. The office sector’s
 PE Investment outlook 2047 Key Opportunities: impetus for the real estate industry to reach its growth
targets efficiently.

54,375
India’s appeal as a global investment destination has been progressively on the rise. A multitude In the imminent future, India’s economy is expected to grow
of measures have been implemented, fostering a favorable economic environment that promotes at a rapid pace driven by factors such as demographic Prominence of Sustainable and green buildings:
transparency, accountability, and streamlined market entry across various sectors in the country. These advantage, rising disposable incomes, government
During the 2021 United Nations Climate Change
factors collectively bolster India’s allure and its capability to attract capital. reforms and policy initiatives. The structural shift in the
Conference or COP26 held at Glasgow, the Indian
Indian economy will provide a major push to the growth
As India cements its reputation as an alluring investment destination, the flow of private equity into the government pledged to achieve net-zero carbon emissions
of all sectors including real estate. For sustainable
real estate sector is anticipated to increase. Historically, private equity investments in the Indian real by 2070. This would mean, the policy makers in India would
growth, it is imperative that India’s real estate sector
estate domain have constituted around 0.15% of India’s Gross Domestic Product (GDP). Given that India’s actively implement a framework to countervail carbon
adapts to transformations in the economy and changing
GDP is expected to reach USD 36.4 tn by 2047, the surge in private equity investments within the Indian emissions. To achieve such an ambitious target, it is
technologies, making optimum use of the growing
real estate sector is projected to amount to USD 54.3 bn by 2047, signifying a CAGR of 9.5% spanning required that all sectors in India collectively contribute to
resources, especially the human capital.
2023 to 2047. reducing their carbon emissions. The real estate sector,
Growing human capital: which is poised to grow rapidly and is one of the key drivers
Several catalysts are poised to drive this growth in investments, as outlined below: of the economy, accounts for 22% of all the emissions
India’s real estate sector is poised for large-scale growth in the country. According to the World Economic Forum,
Growth of the Indian Economy: in the coming years to cater to the growing needs of the 40% of global energy and 40% of all the raw materials are
Projections indicate that the Indian nominal GDP is poised to expand at a CAGR of 12.2%, reaching a economy. For optimum growth, the real estate sector will used by the real estate sector. To collectively achieve the
substantial USD 40 trillion by 2047. This growth trajectory will generate demand for fresh infrastructure, require a well-equipped workforce directed to contribute government’s net zero target, a reduction of the carbon
spanning office spaces, residential properties, and retail venues. to the efficient growth of both the sector and the economy. footprint by the real estate sector will play a prominent
Currently, India’s real estate sector accounts for 18% of the role. The industry is currently at the early stage of adopting
Upcoming Sectors: total employment of the country; however, about 80% of sustainable practices through strategies such as adoption
these employees are categorized as semi-skilled workmen. of India Green Building Council (IGBC) norms, which aim
Promising avenues await private equity investors within emerging sectors such as data centers, The linear growth of the sector in the coming years will to achieve net-zero carbon buildings by 2050. There will
healthcare, hospitality, co-living, and co-working spaces these segments are expected to drive the India demand a well-equipped workforce to contribute to the likely be more investments by the institutional investors in
growth story in the coming years. optimum growth of the sector as well as the economy. India energy efficient and green buildings in India. To align with
Apart from this, the Government of India’s (GoI) robust focus on infrastructure advancement, has a demographic advantage wherein 63% of the total the industry goal of net zero carbon emissions, it will be an
encompassing smart cities casts a favorable outlook. Concurrently, policy overhauls aimed at enhancing population belongs to the under working age group. Thus, opportunity for the real estate developers to scale up their
the ease of conducting business, encompassing streamlined approvals, digitalization, and liberalization there is ample availability of resources in the form of human energy efficient strategies.
of foreign direct investment (FDI) policies, are shaping a conducive investment climate. Furthermore, capital. When equipped with adequate skills, human capital
regulations governing private equity and venture capital, coupled with proactive governmental initiatives, can make a significant contribution to the output generated
are enticing foreign capital into the country. by the sector. At present, despite the existing demographic
advantage, there is a shortage of skilled employees in the
Parallelly, many firms are diversifying their investments into the rural economy, spanning agribusiness, real estate sector. It is necessary for the new workforce to
rural infrastructure, and microfinance, catalyzing market expansion. This growth potential in Indian develop adequate skills and for the existing workforce to
businesses is proving to be a magnet for a spectrum of private equity entities in pursuit of substantial upgrade theirs, to enable sustainable growth of the real
returns. estate sector in India in the long-term.

Adoption of technology:
Journey to 2047: Indian Real Estate PE Investments Projected to Reach USD 59.7 Billion
Technological advancements have played a significant
role in the transformation of the real estate sector in the
last few years. With the adoption of technology, processes
6,918

6,199

such as property search, transactions, registrations etc.

5,642
7,803
7,619

5,357

have become quicker and more organized. The emergence

5,082
4,565

of PropTech (property technology) in recent years has

3,945

played a pivotal role in streamlining property search and

PE Investments (USD mn)

transactions. Advanced technologies such as Artificial

Intelligence (AI), Machine Learning (ML), Internet of Things
2,451

2,222
2,030

(IoT), Building Information Modelling (BIM) etc. have

revolutionized conventional real estate practices. With the
1,133

expansion of the global Information Technology sector,

the evolution of innovative technologies are imminent.
Currently, the global IT industry is estimated to be at
USD 9 tn and at a CAGR of 8.2%, estimated to expand to
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023P 2047E
USD 59 tn by 2047. Thus, innovative technologies along
with growing internet penetration in India, will provide an
Source: Knight Frank Research
KNIGHT FRANK INDIA PVT LTD

Authors
V Shilpa Shree Naresh Sharma
Assistant Vice President Assistant Vice President
Research Research
+91 80 6818 5600 +91 22 6745 0118
shilpa.shree@in.knightfrank.com naresh.sharma@in.knightfrank.com

For further information contact

Gulam Zia Saurabh Mehrotra Vivek Rathi

Senior Executive Director - Executive Director National Director
Research, Advisory, Infrastructure, & Valuation Valuation & Advisory Research
+91 22 6745 0152 +91 22 6745 0154 +91 22 6745 0119
gulam.zia@in.knightfrank.com saurabh.mehrotra@in.knightfrank.com vivek.rathi@in.knightfrank.com

Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank has more than 20,000 people
operating from 487 offices across 53 markets. The Group advises clients ranging from individual owners and buyers to major developers, investors
and corporate tenants.

In India, Knight Frank is headquartered in Mumbai and has more than 1,500 experts across Bengaluru, Delhi, Pune, Hyderabad, Chennai, Kolkata and
Ahmedabad. Backed by strong research and analytics, our experts offer a comprehensive range of real estate services across advisory, valuation
and consulting, transactions (residential, commercial, retail, hospitality, land & capitals), facilities management and project management.

For more information, visit www.knightfrank.co.in

NAREDCO

Mr. Rajan Bandelkar

Presedent, NAREDCO India
Phone : +91 11 2610 0285
president@naredco.in

NAREDCO, an Apex Industry body under the aegis of the Ministry of Housing and Urban Affairs, Government of India has been working as a
continuous knowledge sharing forum, representing the industry with the Government Ministries and Authorities, for Industry grievances, policy
advocacy, implementation and advocating various industry requirements from time to time. In a dynamic stride towards propelling the Indian real
estate sector, the National Real Estate Development Council (NAREDCO) emerges as an instrumental force. Established in 1998 under the aegis of
the Ministry of Housing and Urban Affairs, Government of India, NAREDCO has swiftly risen as the premier industry association for real estate in the
nation. With an extensive membership exceeding 10,000+ across India through its State NAREDCO chapters, the organization assumes a pivotal
role in shaping policies. NAREDCO serves as an authentic platform where government, real estate, and public interests converge, fostering effective
solutions to sector challenges. NAREDCO takes proactive steps in impactful policy advocacy, establishing connections with esteemed government
bodies including the Ministry of Housing and Urban Affairs, the Reserve Bank of India, and the Real Estate Regulatory Authority (RERA), among
others. By amplifying the collective voice of the real estate sector, NAREDCO fosters unity and collaboration among stakeholders. The organization
curates a wide array of events, spanning from seminars and webinars to conferences, to heighten awareness regarding pertinent industry matters.
As a vital link between the government and the real estate landscape, NAREDCO assumes the role of a bridge, propelling policy formulation,
sustainable growth, and harmonious development.

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