Record-Breaking Year for Indian Real Estate Market in 2024

By Anshuman Magazine, New Delhi, December 12, 2024 : The year gone past has seen India’s real estate sector emerge as a formidable force, surging ahead on robust demand, diversified growth, and investor optimism. This dynamic industry now contributes 7.3 per cent to India’s GDP, creating jobs and boosting allied sectors.

This year is set to be a landmark year, marked by record-breaking office leases, a decade-high in residential sales and launches, and soaring consumer confidence. Significant foreign investments and expansions by multinational corporations are further fuelling the sector’s growth.

As a pivotal force driving India’s economic growth, the real estate industry is set to play a transformative role in shaping the nation’s future and unlocking new avenues of progress. In this context, following are the key highlights of the year and an outlook for 2025.

Office sector leasing in 2024 likely to hit historic high

India’s office real estate market has witnessed exceptional performance in 2024, with record-breaking leasing activity totalling 53.3 million sq. ft from January to September. During the same period, 36.2 million sq. ft of new office space was completed, with Bengaluru, Hyderabad, and Pune contributing 66 per cent of the total supply. Global capability centres (GCCs) were a major driver, accounting for 38 per cent of the leasing activity, particularly in Bengaluru (49 per cent), Hyderabad, Pune, and Chennai.

Domestic companies also showed strong demand, representing approximately 42 per cent of office space absorption, with Indian technology firms, flexible space operators, and banks leading the charge. Technology companies saw a notable uptick, accounting for 24 per cent of the overall leasing, with Bengaluru leading at 30 per cent, followed by Delhi-NCR and Hyderabad at 14 per cent each. Other key sectors like BFSI, entertainment and media (E&M), flexible space providers, and life sciences further diversified the demand landscape.

Large deals continued to dominate, with over 50 per cent of leases above 100,000 square feet closed by GCCs, reflecting global firms’ long-term commitment and need for scalable space. As businesses prioritize innovation and collaboration, there has been a notable shift towards higher-quality office spaces, exemplified by the “flight to quality” trend. In 9M 2024, 66 per cent of new office supply was green-certified, with over two-thirds located within integrated tech parks.

Looking ahead, office absorption in India is expected to surpass 70 million square feet in 2024, with GCC leasing activity anticipated to make up 35-40 per cent of the total demand. The market remains strong, fuelled by both domestic and global demand, as well as the increasing emphasis on quality, sustainability, and flexibility in office spaces.

As employee experience gains prominence, occupiers would continue prioritising ‘flight to quality’ relocations and upgrades. Corporates are likely to favour modern, green-certified office developments driven by net-zero goals. This is expected to drive demand for high quality, sustainable spaces within integrated tech parks, shaping the future of India’s office market with a focus on well-being and flexibility.

Record Investment Driven by Office Sector and Land Development

In 2024, India’s real estate market experienced a significant surge in equity capital inflows, reaching a new high of $8.9 billion in the first nine months of the year, reflecting a 46 per cent year-on-year increase. This robust growth was primarily driven by a resurgence in capital deployment during the July-September quarter. Approximately 200 investment deals were recorded during this period, an increase from 151 deals in the same period in 2023. The average deal size rose from around $36 million in 2023 to approximately $45 million in 2024, with mid-sized deals representing 56 per cent of the total investment inflows.

The major gateway cities of Delhi-NCR, Mumbai, and Bengaluru accounted for over 63 per cent of the total investment inflows, with Delhi-NCR leading the pack with a 26 per cent share, amounting to roughly $2.3 billion. Meanwhile, equity capital inflows into tier-II and III cities reached around $600 million, with Ludhiana, Mohali, Tuticorin, Hubli, Coimbatore, and Indore collectively contributing to approximately 76 per cent of these inflows.

In terms of sectors, land and development sites, along with the office sector, captured the largest share of investment, securing around 70 per cent of the total inflows. The residential sector accounted for about 64 per cent of land and development site investments, with the remainder directed towards mixed-use developments, warehousing, retail, and data centers. Additionally, residential, retail, and mixed-use sectors saw a notable rebound, securing a healthy share of the overall capital inflows in 2024.

Institutional investors and collective vehicle investors were pivotal, contributing around 40 per cent of the overall capital inflows. Developer companies played a leading role, accounting for over 41 per cent of the total investment. Domestic investors, predominantly developers, were the largest contributors, investing nearly $6 billion and capturing a 65 per cent share of the overall capital inflows. Foreign investors, led by North American and Singaporean entities, contributed approximately $3.1 billion.

Debt financing also saw significant growth, surging to $4.7 billion in 9M 2024, more than double the amount from the previous year. Of this, 60 per cent was allocated to the primary markets of Delhi-NCR, Mumbai, and Bengaluru, while multi-city deals represented over 30 per cent of the total debt financing. Given the resurgence in investment inflows in office assets and a strong acquisition pipeline for residential land, equity investments in India’s real estate market are expected to reach $10-11 billion by the end of 2024.

Metros and tier-I cities are expected to continue being the primary recipients of equity inflows; however, in view of SEBI’s SM REIT regulations, quality (but smaller) assets in tier-II locations would also offer a window of opportunity for investments. Adopting growth and controlling stake / buyout investment strategies signals the long-term commitment and confidence that investors instill in India’s RE market. Additionally, deal volumes picking pace indicates a wider array of assets gaining access to debt / equity funding.

3PL Drives I&L Leasing Activity

India’s industrial and logistics (I&L) leasing activity has demonstrated remarkable growth, reaching 27.5 million sq. ft in the first nine months of 2024. The regions of Delhi-NCR, Kolkata, and Bengaluru collectively accounted for approximately 61 per cent of the total space take-up. Third-party logistics (3PL) players dominated the market, securing a substantial share of around 39 per cent, as businesses increasingly outsourced their storage and delivery operations to reduce lead times and optimize operational costs. Engineering & manufacturing (E&M) and retail sectors also played significant roles, contributing to an additional 30 per cent of total warehousing space absorption between January and September 2024.

Small-sized transactions, particularly those under 50,000 square feet, became the predominant driver of warehousing leasing activity in 9M 2024, with their share in total transactions rising to 46 per cent, up from 42 per cent during the same period in 2023. This shift reflects a growing demand for smaller, more flexible warehouse spaces, often catering to emerging businesses and those seeking to optimize distribution networks.

In terms of supply, approximately 26.7 million sq. ft of industrial and logistics space was delivered in the first nine months of 2024, with Chennai, Bengaluru, and Delhi-NCR together accounting for roughly 50 per cent of the overall development completions. Institutional investor-backed developers continued to play a key role in driving growth, capturing around 36 per cent of the overall supply. These developers have focused on launching state-of-the-art warehouses, featuring sustainable and technologically advanced facilities, meeting the evolving needs of modern businesses. The rise of these advanced warehouses, coupled with escalating land costs, has contributed to a steady increase in warehousing rental values across key micro-markets, with year-on-year growth ranging between 2-14 per cent from Jan-Sept’24.

The industrial and logistics markets in India’s top eight tier-II cities remained resilient, with Chandigarh, Hosur, and Jaipur leading in both supply and absorption activity. These cities have increasingly become attractive for investors and occupiers seeking to expand beyond the major metropolitan areas, benefiting from improving infrastructure and rising disposable incomes.

Looking forward, warehousing leasing activity in key markets such as Delhi-NCR and Bengaluru is expected to accelerate, fuelled by an increase in new inquiries, the introduction of high-quality supply, and the finalization of pending transactions. As disposable incomes continue to rise and infrastructure development progresses, both investors and occupiers are projected to further expand into tier-II and tier-III cities. Chandigarh, Hosur, Jaipur, Lucknow, and Vizag are emerging as key markets with strong growth potential in the coming quarters.

Warehouse rentals are expected to continue increasing on an annualised basis in 2024. This would largely be driven by the premium commanded by upcoming investment-grade assets in prime locations, coupled with rising land and input costs. In select micro-markets witnessing sluggish occupier appetite, developers could offer incentives to aid transaction closures.

D2C and Fashion Brands Drive Retail Leasing 

Despite the limited addition of new retail stock, retail leasing trends in India exhibited remarkable resilience in the first nine months of 2024, with a total absorption of approximately 4.5 million sq. ft. The fashion and apparel segment remained a dominant force, contributing 38 per cent to overall retail leasing activity, driven primarily by mid-range, value fashion, and athleisure brands. This reflects the sustained consumer demand for stylish yet affordable clothing options that cater to a wide demographic.

The food and beverages (F&B) sector, led by the growing presence of coffee shops and casual dining restaurants, also played a pivotal role in the retail leasing market, accounting for around 11 per cent of the total retail space absorption in 9M 2024. This surge in F&B demand underscores the expanding trend of social dining and the increasing preference for experiences that blend food, leisure, and socializing in a single location.

Retail rental values in India’s tier-I and II cities demonstrated a positive trajectory during this period, with key retail locations experiencing year-on-year growth of 5-10 per cent in rental rates. This reflects the continued demand for high-quality retail spaces in prime areas, despite the challenges posed by supply constraints. A CBRE survey further highlighted that approximately 90 per cent of tier-I city consumers are willing to allocate ₹4,000 monthly on entertainment experiences. Furthermore, over 70 per cent of respondents expressed a preference for malls as their go-to venue for entertainment, appreciating the synergy they offer between shopping, convenience, and dining.

Although there has been a realignment in retail supply timelines, India’s Grade A mall supply is projected to reach between 1 and 1.5 million sq. ft in 2024. This growth is driven by the sustained demand for premium retail spaces, underscored by the expanding spending capacity of the affluent consumer segment. Luxury brands, in particular, accounted for approximately 6 per cent of total retail leasing activity in 2024, reflecting the ongoing growth of India’s luxury retail market. Notably, global retailers such as Zen Diamonds, a Turkish luxury jewellery brand, and Brunch & Cake, a Spanish food and beverage concept, have recently entered the Indian market, underscoring the country’s enduring appeal as a prime destination for international brands.

The direct-to-consumer (D2C) sector has also witnessed substantial growth in retail leasing, with more than 600 new brands entering the Indian market since 2016. This is a testament to the evolving retail landscape, as D2C brands capitalize on the opportunities presented by India’s growing digital and physical retail ecosystems. Furthermore, the integration of community spaces and smart technologies into shopping malls has significantly enhanced their appeal, allowing them to attract a broader, more diverse customer base. This trend is expected to accelerate, as retailers seek to create immersive and engaging shopping experiences for the modern consumer.

Growing demand from newer categories amidst limited space availability is likely to drive retail rental increments; the rise is expected to be divergent, with factors such as developer profile, location, and mall positioning playing a critical role in rental escalations.

Residential Market Driven by Mid-End and Luxury Segments

India’s housing market remains resilient, underpinned by strong fundamentals and a consistent demand for residential properties. In the first nine months of 2024, residential sales surpassed 225,000 units, bolstered by the launch of 215,000 new projects. This dynamic market saw Mumbai and Pune accounting for nearly 50 per cent of the overall residential supply and demand activity, with other prominent markets such as Hyderabad, Bengaluru, and Delhi-NCR contributing significantly to the national numbers.

The property price landscape in India exhibited moderate yet steady capital value growth, ranging between 4-7 per cent year-on-year during the first nine months of 2024. This growth was largely driven by a delicate balance between new launches and the robust sales activity, offering a wide array of options for prospective buyers across various segments. As such, the market remained buoyant, providing opportunities for both developers and buyers to engage in transactions that reflect the evolving demand dynamics.

In terms of demand, the mid-end segment continued to lead India’s housing sales, contributing approximately 43 per cent of the total residential demand during 9M 2024. This was followed by the high-end segment, which accounted for around 27 per cent of the market. Notably, the premium and luxury housing segments experienced a remarkable rise in demand, with their collective share of the overall residential demand increasing from 6 per cent in 2019 to 16 per cent in the first nine months of 2024. This surge in demand for premium and luxury properties has prompted developers to launch a substantial number of new projects, making up about 19 per cent of India’s total new residential launches during the period.

As consumers increasingly prioritize larger, more luxurious homes with enhanced amenities and surroundings, traditional markets that were once dominated by mid-end properties—such as Noida, Bengaluru, Pune, and Chennai—are now witnessing a notable shift toward high-end developments. This shift underscores a broader trend where homebuyers are seeking premium living environments that offer not only space but also convenience, comfort, and superior quality of life.

Recent data from the Reserve Bank of India (RBI) highlights an 18 per cent year-on-year growth in home loan deployment as of September 2024, further reinforcing the growing inclination toward homeownership and the expanding role of credit in facilitating property transactions. This surge in home loan activity is indicative of the sustained optimism in the housing market, driven by both affordability and consumer confidence.

Given the strong performance of the residential sector through the first three quarters of 2024, it is anticipated that both sales and new launches will remain robust in the short term. However, the trajectory of property prices is expected to exhibit some divergence, influenced by various factors such as unsold inventory levels, project quality, location, and access to infrastructure. These elements will play a crucial role in shaping the future direction of India’s housing market.

We expect demand for bank credit to remain strong; the anticipated interest rate reductions and regulatory support in the upcoming months will likely further boost demand. However, amidst the euphoric residential cycle, due diligence by lenders is expected to play a critical role in mitigating the risk of defaults, thus keeping non-performing assets in check. As luxury housing shifts gears from traditional bungalows to apartments and penthouses, we anticipate the premiumisation of amenities (in contrast to providing additional amenities) to be a key differentiator for luxury projects.

The writer is Chairman & CEO — India, South-East Asia, Middle East & Africa — CBRE