Nicholas Spiro

The View | India’s trend-defying property market is a sight to behold

A growing middle class, the right government support and a favourable external environment have given the property sector wings to escape the headwinds buffeting markets elsewhere

The Indian economy’s exceptional performance and potential is driving sentiment all across the sector, from residential to office and retail

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Labourers work at a building site in Mumbai on September 12, 2023. While India faces major economic challenges, the property industry is going from strength to strength. Photo: AFP

Nicholas Spiro

Published: 4:30pm, 29 Jan 2024

At a time when the real estate industry the world over faces severe headwinds, from the sharp rise in interest rates to weaker demand for offices in the post-pandemic world, the outperformance of India’s property market is a marvel to behold. A confluence of unique and potent domestic and external factors is transforming the sector and turbocharging growth.

First, the expansion of the middle class is setting the stage for a discretionary consumption boom. According to Morgan Stanley, the number of households earning in excess of US$35,000 a year is likely to rise fivefold between 2021 and 2031, with consumption driven by the “AAA” opportunity of age, aspiration and access. This makes India “the best domestic demand” story in Asia, Morgan Stanley says.

Second, India’s appeal as “the office to the world” – underpinned by the nation’s vast low-cost talent pool and much lower office rents than in other leading markets – is enhanced by government policies aimed at improving the competitiveness of the manufacturing sector in an effort to make India the “factory to the world” as well.

Third, long-awaited supply-side and regulatory reforms, including the development of a listed real estate investment trust (Reit) market, have improved the business environment significantly and catalysed the institutionalisation and financialisation of the property industry.

Fourth, India is taking advantage of the geopolitical reshaping of supply chains as multinational companies seek to increase their resilience to future shocks. Asia’s third-largest economy is more open than China’s, with fewer curbs on foreign direct investment, particularly in the technology sector, “which means [multinationals] are able to participate more actively in India’s growth story”, Morgan Stanley notes.

To be sure, there are serious concerns about India’s economy. Not only has it failed to create enough jobs, casting doubt over whether the country can seize its much-touted “demographic dividend”, private investment has remained weak while the government’s conservative and nationalistic agenda seems to take priority over further reforms.