Urbanization and Real Estate: Preparing Indian Cities for the Future

As per the United Nations SDG 2022 (Sustainable Development Goals), by 2050, around 70% of the world’s population will live in cities. Presently, around 50% of people live in cities, so in the coming three decades, this growth will be around 20%. Currently, in Indian cities, approximately 65 million people live. By 2050, this number will be around 420 million. So, are our cities ready for that expansion?

India has been the fastest-growing economy for the last two decades; we aspire to reach the top three economies in the coming years (by 2030 or before). As per the latest report by Knight Frank & NAREDCO, by 2047, the Indian GDP is expected to grow to around 33-40 trillion USD. Of this, real estate sector is expected to reach US$ 1 trillion by 2030 and US$ 5.8 trillion by 2047, will contribute around 15% of the GDP.

Rapid urbanization will lead to increased number of people living in Indian cities, expected to reach 542 million people by 2025 and 675 million people by 2035. To achieve this, approximately 230 million additional residential projects will be required.

Looking at the all-time high exponential sales of luxury housing in NCR, Mumbai and Bangalore, high demand of such products is evident. Although due to increased lad, construction and approval costs have drifted developers in opting for mid income group’s housing or affordable housing. But, in due course of time when the investors’ interest will mature along with the saturated market of secondary sales, it is expected that the developers will focus on mid income group’s product (if not the affordable one).

Although the very famous 7-year cycle of real estate and the myth of up-cycle and down-cycle has been a talking point of brokers fraternity, the population shifting to cities and requirement of housing number supports the real estate boom for a minimum of 2 decades from now onwards. This is obviously dependent on several factors of political and geological aspects. Still, the more concerning is not the demand, it is the availability of enablers / companies who will achieve this target. Unlike software, the construction business is complex; new entrants promising to make the tallest tower of the town is not a joke. Developers promising such claims should be thoroughly assessed by the RERA authority and other competent DTCP bodies. India has seen many such claims and at the end dreams of common man has been broken. Still, over 2 lakh units were not delivered to homebuyers in Delhi-NCR itself.

India is poised for a significant industrial transformation. The Cabinet Committee on Economic Affairs has approved the development of 12 new industrial towns under the National Industrial Corridor Development Program (NICDP). These projects, aligned with the PM Gati-Shakti National Master Plan, aim to integrate multi-modal connectivity infrastructure, ensuring the seamless movement of people, goods, and services. It will take a decade or two for these industrial cities to fully develop and provide all necessary amenities, eventually becoming well-developed urban areas. This initiative is expected to create jobs and, in the long run, serve as a growth engine for India’s industrial sector. It is great to see private players like Reliance working in similar lines, MET City is developing rapidly and is gradually becoming an industrial hub in Haryana. The demand for real estate in MET is now starting to pick up pace. We need many more such investments in the Indian industrial sector. The government should support private entities in collaborating with the public sector by providing easy approvals and incentives if necessary.

Overall, the real estate sector is not just focused on metros but also on tier-two cities and industrial towns. To boost the economy, the government may support startups in the real estate sector. As the second- largest employer, increased construction in real estate will help reduce unemployment. However, a key question for future discussion is how to make the real estate industry more attractive as an employer. Currently, it is often seen as a labor-intensive industry, which is why many people prefer jobs in delivery companies over those in real estate.

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