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Real estate sector expected to expand to $5.8 trn by 2047: Knight Frank-NAREDCO

Hyderabad/Mumbai, August 26, 2023: In its latest report – India Real Estate: Vision 2047, Knight Frank India, a leading real estate consultancy in the country, in association of NAREDCO has projected that India’s real estate sector is expected to expand to USD 5.8 trillion (trn) or USD 5,833 billion (bn) by 2047. This estimated real estate output value will contribute 15.5% to the total economic output in 2047 from an existing share of 7.3%. 

The report India Real Estate: Vision 2047 will be unveiled by M. Venkaiah Naidu, Former Vice President, Govt of India at NAREDCO’s Silver Jubilee Celebration event in Hyderabad, along with other dignitaries present at the event.

By 2047, when India reaches 100 years of independence, the size of India’s economy is estimated to range between USD 33 trn to USD 40 trn. 

For study purpose, Knight Frank taken the the mean estimated growth of Indian economy to value USD 36.4 trn by 2047. 

Potential output growth of Real Estate and key assets by 2047

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20222047 E
Indian Real Estate OutputUSD 477 bnUSD 5.8 tn or USD 5833 bn
Residential Real Estate OutputUSD 299 bn or 0.30 tnUSD 3.5 tn or USD 3500 bn
Office Real Estate OutputUSD 40 bn or 0.04 tnUSD 0.47 tn or USD 473 bn
Warehousing Real Estate OutputUSD 2.9 bnUSD 0.034 tn or USD 34 bn

                                Source: Knight Frank Research 

Private equity (PE) investments in the Indian real estate sector have consistently grown over the past two decades. Projections for 2023 indicate that PE investments in Indian real estate are poised to reach USD 5.6 bn, reflecting a YoY growth of 5.3%. 

With India’s GDP expected to reach USD 36.4 trn by 2047, the private equity investments within the Indian real estate sector are projected to surge to USD 54.3 bn by 2047, signifying a CAGR of 9.5% spanning 2023 to 2047.

Providing perspective on REITs, Knight Frank shared that the combined portfolio of Indian REITs encompasses 84.9 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 construction of approximately 21.3 mn sq ft within the REITs sector, projected to reach completion within 1-2 years. 

Commenting on the occasion, Rajan Bandelkar, President NAREDCO India said, “Vision 2047, not just for NAREDCO but for Indian Real Estate, is about the roadmap of India’s economic growth, and the role of real estate as one of the leading engines of that growth story,” said Rajan Bandelkar, President, NAREDCO. “Significant expansion of the Indian economy by 2047, will be powered by Real Estate. A multifold economic expansion will boost demand across all the asset classes – residential, commercial, warehousing, industrial land developments etc – will grow at a multiplier rate to accommodate the growing needs of the economy and consumption needs of the individuals,”

Global Recognition: Indian REITs Making Their Mark

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Office Portfolio (mn sq ft)USAUKAustraliaSingaporeChinaIndia
GDP (USD bn)25,4603,1301,60659118,1003,390
First REIT Launch Year196020071971200220012019
No of REITs206564642284
REITs Market Cap (USD bn)1,226.165.990.377.54.78
Market Cap/GDP4.8%2.1%5.6%13.1%0.0%0.2%

Source: Knight Frank Research

With the initial REITs setting a positive precedent, it is probable that REITs in the coming years will expand into diverse sectors such as residential and warehousing, in addition to the existing office and retail segments. Inspired by global markets, developers are likely to contemplate venturing into REITs for alternative asset classes like data centers, hospitality, healthcare, education and more, in the longer term over the next 25 years.

Details of estimated growth potential across RE asset classes by 2047

Residential 

According to Knight Frank India, in the next 25 years, cumulatively there will be an estimated 230 million units of housing requirement in India. In terms of market value, the residential market has a potential to generate an output equivalent of USD 3.5 trn in 2047. 

It is expected that with the changing income profiles, the demand for housing will emerge across all the price categories. In the next few years, while the demand for housing will remain concentrated in affordable housing, it will gradually shift towards mid segment and luxury housing. The share of lower income households will reduce from existing 43% currently to 9% in 2047. Thus, a significant share of the population will shift to lower middle and upper middle-income categories. This will enable a significant demand for mid-segment housing. Additionally, the share of HNIs and UHNIs households in India which will likely increase from existing 3% to 9% in 2047 will generate a significant demand for luxury housing in India.   

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Niranjan Hiranandani

Dr Niranjan Hiranandani, National Vice Chairman of NAREDCO, opines that, “PMO’s ambitious project Housing for All will propel the sustainable demand for residential housing across the spectrum. A strong foundation for the upward cyclical growth of the real estate sector is being laid by the Government of India and the regulatory authorities. The northbound growth in the Indian Real Estate sector is driven by the favourable domestic economic environment with economic resilience, bolstered infrastructure growth plans, alternative investment models, and domestic consumption power. Growing GDP will stimulate commercial and industrial real estate growth, attracting global investors towards Grade A assets. Emerging alternative asset classes will also play a critical role in pooling investments and boosting investors’ confidence.

Estimation of share of households across different income groups

Source: World Economic Forum, Knight Frank Research

Office

As per Knight Frank estimates, 69% of the working population will be formally employed to support the economic expansion of US$ 36 trn by 2047. In terms of market value, the estimated office stock is likely to generate a potential output equivalent to USD 473 bn in 2047.

The office stock has grown significantly from 278 mn sq ft in 2008 to 898 mn sq ft cumulatively across the leading eight cities in India in 2022. 

Office stock in India

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Source: Knight Frank Research. Note: Office stock across top 8 cities in India, 2023. Data is till June 2023

shishir baijal

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “The next 25 years are going to witness a dramatic transformation in the Indian economy and the real estate sector. Factors like demographic advantages, improving business and investment sentiments, and government policy push towards high-value output sectors such as manufacturing, infrastructure etc. will robustly support the economic expansion of India. In the imminent future, India’s economy is expected to grow at a rapid pace, and the structural shift in the economy will be led by a major push to the growth of all sectors including real estate. For sustainable growth, it is imperative that India’s real estate sector adapts to transformations in the economy and changing technologies, making optimum use of the growing resources, especially the human capital.”

Warehousing 

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 the year 2047. India’s warehousing sector has a potential to generate an output equivalent to USD 34 bn in 2047.

Potential warehousing transaction volume in 2047E

Source: Knight Frank Research

In a sperate section of the report on the impetus of manufacturing sector to industrial development, Knight Frank estimates that by 2047, at an average pace of growth India’s manufacturing sector is likely to contribute 32% to the country’s economic growth. 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.   To cater to the manufacturing activities in the economy in the next 25 years, an estimated 102 lakh hectares of land is required for usage of 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. 

Industrial land requirement in 2047

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Source: GoI, Knight Frank Research

Retail

As per Knight Frank estimates, organized retail consumption is currently estimated to be at 4.6% of the total private consumption of individuals. This is significantly smaller when compared to developed markets such as the US, where retail consumption comprises 40% of the total private consumption of individuals. However, with growing income levels and the growing propensity of households in India to consume, by 2047, when the size of the Indian economy is estimated to be USD 36.4 trillion, the share of retail consumption is estimated to be 37% of the total private consumption. This quantum of consumption boost will support the entry and expansion of retailers in India and provide an impetus to the retail real estate both for the shopping malls and the high streets.

– END –

About Knight Frank:

Knight Frank LLP is a leading independent, global property consultancy. Headquartered in London, Knight Frank has more than 20,000 people operating from over 487 offices across 53 markets. The Group advises clients ranging from individual owners and buyers to major developers, investors, and corporate tenants. For further information about the Company, please visit www.knightfrank.com

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Knight Frank India is headquartered in Mumbai and has more than 1,500 experts across Bangalore, 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 and capitals), facilities management and project management. For more information, visit www.knightfrank.co.in

For further information, please contact:

Piyali Dasgupta (Knight Frank India)+91 9833571204 piyali.dasgupta@in.knightfrank.comTania Banerjee (Knight Frank India) +91 98190 04431Tania.banerjee@in.knightfrank.comMansoor Khan (White Marque Solutions)+91 8108385015mansoor@whitemarquesolutions.comVivek Sood(Region Public Relations)+91 9818276782vivek@regionalpr.in

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