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India's real estate sector is entering a "sweet spot," supported by a unique combination of favourable factors expected to drive growth over the next three to five years, according to a UBS report.
The report highlights multiple tailwinds for the residential sector, including record-low inventory levels, strong affordability, supportive regulations, and increased consolidation among developers. Additionally, factors such as urbanization, rising incomes, and potentially lower interest rates further bolster the outlook. The Indian property sector has been at its healthiest in the past 15 years with strong demand momentum and low inventory overhang. For the first time, there is a combination of multiple tailwinds in the property segment including the lowest inventory overhang in 15 years, despite recent price increases there is the strongest affordability in 15 years, likely turn of the interest rate cycle which will aid affordable housing, sector consolidation with the share of the top developers at an all-time high (up from 7-8 per cent to around 25 per cent in the past 10 years), strong regulations (RERA) in place to protect homebuyers and favourable demographic factors such as increasing urbanisation and nuclearisation of families. UBS forecasts a 15 per cent compound annual growth rate (CAGR) in residential pre-sales between FY24 and FY29, contrasting with a decline in the pre-COVID years. India's housing market is structurally better placed than other global markets during their peak years. Unlike in other regions, India enjoys favourable demographics, low household debt, and better affordability, the report notes. UBS compares India's macroeconomic scenario to China's in the early 2000s, which marked the beginning of a prolonged property boom for the latter. Commercial real estate is also rebounding as work-from-office trends grow and global capability centres (GCCs) expand. Favourable regulatory changes have further supported the sector. UBS forecasts a 26 per cent topline CAGR for the commercial segment from FY24 to FY29, making it an attractive space for developers capable of investing upfront in projects to secure high-margin annuity income. (ANI)
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