V Nagarajan

India’s real estate sector has forward and backward linkages with approximately 250 ancillary industries. It is one of the highest employment generators after the agriculture sector, accounting for 18 per cent of the total employment. In terms of output, the market size of India’s real estate sector is currently estimated at $482 billion contributing 7.3 per cent to the total economic outputs.

By 2034, India’s real estate sector is expected to expand to $1.5 trillion contributing 10.5 per cent to the total economic output, according to Knight Frank India survey.

Factors such as growing residential demand, increase in need for contemporary office space, expanding hospitality, retail sector etc to cater to the growing consumption needs of the growing population with increased income levels, are adding an impetus to real estate sector in India.

Furthermore, expanding e-commerce is catalysing the demand for warehousing and storage facilities in India providing a thrust to the industry. Additionally, in recent years, the growing use of telecommunication services has necessitated the need for data centres or data storage facilities in India.

India’s population is expected to surge to 1.55 billion by 2034 with an estimated 42.5 per cent of the population residing in urban centres. Additionally, there is a scope for the existing rural and small towns to transform into mini-urban towns.

The burgeoning urban population will generate the demand for housing in India, especially in the cities. As per our estimates, to accommodate the urban population, urban cities in India will require an addition of 78 mn housing units by between 2024-34.

To accommodate the burgeoning economic activity and formal employment, an estimated 2.7 billion sq ft of office space will be cumulatively required by 2034, i.e. an additional requirement of 1.7 billion sq ft in the next decade. As the sector scales up, the potential revenue generation from India ‘s office real estate is estimated to be $125 billion in 2034.

Apart from key manufacturing, sectors like organised retail, cold storages, automotives, pharmaceuticals and life sciences – sectors which have evolved radically, will further provide an impetus to the warehousing sector in India. India’s warehousing market is likely to witness a potential annual demand of 111 million sq ft by 2034 a significant expansion from current annual leasing volume of ~65 million sq ft and the sector has a capacity to generate a revenue of $8.9 billion during the next decade.

If these policy initiatives establish India as an attractive investment destination, the output generation from the manufacturing sector has the potential to expand from 15 per cent of the GDP currently to 21.3 per cent of the GDP by 2034. This quantum of growth would require development and expansion of industrial infrastructure in the economy where the land is a pre-requisite.

Indian REITs collectively hold a portfolio spanning 100.7 million sq ft, with 91.1 million sq ft allocated to office assets and 9.6 mn sq ft to retail assets. Furthermore, ongoing construction within the REITs sector amounts to approximately 21.2 million sq ft, slated for completion within the next few years.

Over the past two decades, private equity (PE) investments in the Indian real estate sector have demonstrated consistent and gradual growth. In 2023, private equity (PE) investments in the Indian real estate sector experienced a YoY decline of 44 per cent, totaling $3.1 billion.

Global geopolitical uncertainties and high interest rates worldwide contributed to investor caution, leading to limited market engagement.  With India’s GDP projected to reach $11.3 trillion by 2034, the surge in private equity investments in the real estate sector is estimated to reach $14.9 billion by 2034, representing a Compound Annual Growth Rate (CAGR) of 17 per cent between 2023 to 2034.

What are the tax implications while reinvesting sale proceeds in a new unit? Dinesh, Sharjah.

As you are investing the entire capital gains, you are entitled for exemption from the payment of capital gains tax as per section 54. You are required to invest in the new flat within two years of the date of the sale. In case the investment is not made before the due date of filing your income-tax return, then you need to deposit capital gain amount in the capital gain accounts scheme maintained with a scheduled bank in order to get deduction.

I have invested with a land developer who visited Gulf some time ago. But I found out it was agriculture land. What is the relief available to me now? Rakesh Sharma, Dubai.

NRIs/PIOs are not allowed to invest in agriculture land, plantation property and farmhouse. You have a legal remedy due to deficiency in services on the part of the land promoter. You can approach the state consumer forum for seeking compensation and for the agony undergone.