5 key trends driving real estate market in South India

The Indian real estate sector has witnessed rapid growth in recent years, although during the period 2020-22, the teething problems posed by the pandemic, brought about radical change in the sector, and ushered dynamic challenges. However, it made a quick recovery with demand gaining momentum. According to a recent industry report, there will be $1 trillion of real estate sales in India by 2030, and it will contribute 13 per cent to GDP by 2025. Although the market in each state is unique, the South continues to dominate.

Factors like availability of well-planned infrastructure and presence of strong employment opportunities led by IT/ITeS sector and the manufacturing industry have augmented the attraction of the southern markets. The growing demand for property in the southern cities is boosted by factors such as the proximity to major transportation hubs, excellent healthcare facilities, and a pleasant climate, as buyers focus more on affordability and connectivity. A good portion of the region's investments have also been made by non-resident Indians (NRIs), who have been drawn to this part of the country because of its market's stability.

Southern markets have remained robust, and their dynamics are driven by end-user demand. In contrast to other key cities, the southern markets have been able to harness the market slowdown by reducing the number of new launches and focusing on completing projects instead of starting new ones. There is also significant land available for development in the region. Some key cities such as Bengaluru, Hyderabad and Chennai have emerged as the best-performing and preferred real estate destinations in the country.

 Key trends driving the real estate market in South India include:

Organised intercity infrastructure: The public infrastructure and transportation facilities available in this market have a decisive impact on the economic growth. These facilities are constantly evolving in the southern part of this market, as it attracts a growing number of people and companies. Consumers have become more selective about where they live as infrastructure has been given priority in the South. In urban cities like Bengaluru, Chennai and Hyderabad there are new infrastructure. Bengaluru has upcoming infrastructure projects in the pipeline that range from the metros linking the entire city with the airport, to interior regions. Further, Chennai has a strong pipeline of projects supporting road infrastructure to reduce the traffic on the express highways. Similarly, even Hyderabad is making strides towards developing systems to incorporate easy and accessible connectivity. With all these upcoming and present vigorous infrastructure projects, South India makes property investment vastly appealing.

Powerful start-up and IT growth: Bengaluru is the start-up capital of the country leading at the forefront of creating a breeding ground for innovation and creativity. Along with Chennai and Hyderabad, these three cities are among the top 10 for start-up hubs in the country. This is the primary reason for the growing trajectory of corporate and commercial real estate demand in the south, which is growing and is on an upward trajectory. Hyderabad has unfolded as one of the prime home grounds for outsourcing business to US, UK, and Europe markets. The scope for corporate real estate is on a roll as more foreign investors are looking to set their IT bases in the prime locations of South India.

Foreign/NRI investments: In addition to having a wide range of infrastructure, South India is an attractive location to invest offshore due to its capital appreciation and established developer brands. Indian developers and markets must make the most of the inbound opportunity to attract NRI investors who want to connect to their roots. Also, the growing dollar to rupee exchange lures NRIs to continue with their investment.

Land availability: When compared with the West and Northern parts of the country, land prices in the South are very affordable. Land is readily available at reasonable prices in southern cities, as they are less saturated. This makes these markets all the more affordable, and the reason for the growing demand for housing in these regions.

Exponential retail growth: The key markets in South India have seen a sharp rise in retail and commercial growth in recent years. Several well-known chains of malls, supermarkets and shops have opened to meet the growing demand for their goods and services. International brands as well as premium Indian brands are making an impact in the South Indian market to accommodate the on-the-go generation with pristine tastes.

In conclusion

The above factors are catalysts towards driving the growth of real estate in South India. Cities like Bengaluru, Hyderabad and Chennai are growing at a fast pace with presence of zestful professional class and a well-developed corporate ecosystem. The ever-increasing co-working segment has also brought more focus on real estate in South India, and it will only further thrive in the coming years. The home buyer's preferences are evolving. They are consciously looking for smart flexi-homes in verdant green spaces, and this has driven two segments of real estate- peripheral suburbs and self-sustained townships. The future looks promising for real estate players in South India, especially for those who have diversified their portfolios and have the expertise to add value and capitalise on opportunities in both promising as well as challenging times.

- Shivam Agarwal

 Strategy Advisor, Sattva Group

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