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PropTech Segment in Indian Real Estate Set Cross $600 Bn in Market Size by 2047: CREDAI-EY Report

New Delhi, November 24, 2024: As India heads towards its holistic and joint mission of ‘Viksit Bharat’, Indian Real Estate is set to play a pivotal role, according to a joint report launched by CREDAI and Ernst & Young, at CREDAI’s 25^th foundation day in New Delhi. According to the study, the Indian Real Estate sector is set to cross $4.8 Trillion in market size by 2047 – contributing over 18% to the projected $26 Trillion GDP target for the same time period. The study further reveals that PropTech is bound to grow at a sustained rate, with the segment reaching $600 Billion in market size by 2047 – approximately 12-13% of the entire real estate industry. This is further validation of the ongoing and projected technological revolution in real estate, given that currently, PropTech makes up less than 5% of the $300 Billion real estate sector.

The report highlights how innovations like Artificial Intelligence (AI), Internet of Things (IoT), and Building Information Modelling (BIM) are revolutionizing operations, enhancing efficiency, and ensuring transparency across the real estate value chain. This transformation supports India’s projected $26 trillion GDP by 2047, with the real estate sector projected to contribute over 18%, up from its current 7% share of the GDP.

Employing over 77 million people – approximately 14-15% of India’s entire workforce – India’s real estate sector has consistently been a key economic pillar and is set to grow in prominence over the next decade. Macro level Infrastructure initiatives, including the National Infrastructure Pipeline (NIP) and PM Gati Shakti, are closely linked to this growth. The NIP aims for targeted investments of US$1.4t over the next decade in transport, energy, communication and social infrastructure. These projects, spanning roads, railways, airports, and ports, are unlocking opportunities in adjacent real estate markets. Tier II & III cities such as Indore, Surat, Jaipur, Chandigarh, Salem, Bhopal, Visakhapatnam and Agra amongst others are emerging as the new real estate investment hubs and are expected to grow fuelled by various factors, initiatives and demand. Additionally, India’s young population and expanding middle class, projected to surpass one billion by 2047, are set to propel discretionary spending, housing demand, and real estate investments.

To achieve the vision of “Viksit Bharat” by 2047, CREDAI emphasizes the need for strategic reforms and policy interventions to build a sustainable and inclusive real estate ecosystem. CREDAI strongly believes that Indian Real Estate has the potential to be the nucleus of sustained and sustainable economic growth, and recommends the following amendments to fast track the growth of the economy:

– Grant of Industry Status to Real Estate sector – This will facilitate easier access to institutional financing and lower borrowing costs for developers

– Affordable Housing Definition – The current definition of Affordable Housing is based on a dual threshold: a sale value of INR 45 lakhs and a carpet area of up to 90 sqm in non-metropolitan cities/towns, or 60 sqm in metro cities. However, this definition has become unviable due to rising inflation, increased costs of raw materials, and higher land prices, making the original price and size limits financially unfeasible for real estate developers. CREDAI proposes redefining Affordable Housing by increasing the threshold sale value to INR 90 lakhs.

– Input Tax Credit- CREDAI proposes offering developers the option to choose a GST scheme in the beginning for each project (both residential and commercial). The options would include the 1%/5% composite scheme without ITC, or the 12%/8% scheme (after land abatement) with ITC under the regular assessment scheme. Both options are designed to be revenue-neutral in terms of GST collections.

– Availability of Land – Ensuring the availability of land through effective zoning and streamlined land acquisition policies is critical for sustainable urbanization. CREDAI advocates for the development of planned satellite towns near major urban agglomerations, which would decongest metros and foster balanced regional development.

– Financing Models – Developing investor-friendly models is essential to support infrastructure and housing development. CREDAI suggests exploring the feasibility of implementing a housing finance guarantee scheme for affordable housing projects. Additionally, introducing flexible FSI (Floor Space Index) payment options and facilitating access to low-interest loans for developers can further enhance project feasibility and affordability.

Boman Irani, President, CREDAI “Indian Real Estate finds itself at an extremely crucial and exciting junction – characterized by rapid urbanization, technological integration, pivot towards sustainable methodologies and ever-increasing homebuyer and Government focus. An amalgamation of this magnitude and scale has definitely put the sector firmly as the focal point of India’s robust economy. We constantly expect to take smaller, yet significant steps of development as we march towards our collective mission of ‘Viksit Bharat’ by 2047. At this momentous day of CREDAI’s 25^th foundation day, it gives us immense pride and joy to be able to not just celebrate what real estate stands for today but the potential that it possesses to transform our country’s journey towards being a developed nation.”

Manoj Gaur, CREDAI Chairman “It is with great honour that we present this insightful report by CREDAI and EY, that further validates the current and future contributions of Indian Real Estate sector to the overall economy. As the sector evolves to meet the needs of a rapidly urbanizing population, it is imperative to adopt forward-thinking approaches that align with India’s growth aspirations. By redefining the affordable housing parameters to reflect current economic realities and focusing on planned satellite towns near major urban centres, we can address urban congestion, ensure balanced regional growth, and make housing more accessible to India’s growing middle class. These initiatives, coupled with strategic policy interventions, will enable the sector to unlock its full potential and contribute meaningfully to India’s journey toward becoming a developed economy”