Factors Shaping the Real Estate Market in 2025
The year 2025 is likely to see significant changes in the real estate sector, driven by various factors such as the performance of office spaces, housing market trends, top developers, retail sector growth, and funding momentum.
Real EstateOffice SpacesHousing MarketRetail SectorFundingReal Estate MumbaiJan 07, 2025
All eyes are on global capability centres (GCCs), which emerged as the highest contributor in office space leasing in 2024.
GCCs, along with tech companies and flexible workspace operators, will continue to drive the sector this year.
New firms entering India and Indian corporates are also expected to contribute to the market.
According to property advisory CBRE India, gross leasing of commercial office space reached a historic high of 79 million sq ft last year.
However, the supply of Grade A office space is low in key micro-markets in Mumbai and Bengaluru.
For the leasing momentum to continue, a fresh supply of high-quality office space is essential.
Can the Housing Market Recover?
Following a marginal dip in home sales and project launches last year, 2025 could mark a transition after the post-pandemic high.
As per Liases Foras Research, with launches slowing down and pent-up demand used up in recent years, there could be a gradual decline in sales.
Price appreciation has made some cities a bit overheated, which could discourage investors and homebuyers.
The enthusiasm for luxury housing projects may wane, and the markets could correct themselves, shifting focus back to affordable and mid-income housing projects.
How Will the Top Developers Perform?
On the residential front, the four listed developers—DLF, Prestige Group, Macrotech Developers, and Godrej Properties—are expected to grow both in sales and launches.
Their collective target to achieve ₹88,000 crore in sales for 2024-25 is driven by their financial capabilities and aggressive expansion plans, analysts predict.
Will the Retail Sector Pick Up?
Shopping malls experienced healthy leasing last year due to good demand from retailers, despite minimal new supply.
The retail mall landscape has seen a shift towards premium offerings.
Leasing is expected to be higher in 2025, thanks to a large supply pipeline and demand from foreign and domestic retailers.
According to JLL India, around 9.7 million sq ft of new retail supply, across 26 Grade A shopping malls, is expected to become operational this year, with Delhi-NCR leading the way (35%).
Can the Funding Momentum Continue?
Institutional funding in real estate hit a record in 2024, surpassing the 2007 peak by 6%, highlighting the return of investors.
Investments worth $8.9 billion were made last year, marking a 51% year-on-year increase, with the residential sector leading the way.
While it may be challenging to surpass the 2024 peak, the funding momentum is expected to continue this year, with participation from both foreign and domestic investors.
Funds pledged in 2024 are likely to come in over the next 3-5 years.
Frequently Asked Questions
What are global capability centres (GCCs) and how do they impact the office sector?
Global capability centres (GCCs) are back-office and shared service centres that support multinational corporations. They emerged as the highest contributor in office space leasing in 2024 and are expected to continue driving the sector in 2025. GCCs, alongside tech companies and flexible workspace operators, are pivotal in the office sector's growth.
Why is the supply of Grade A office space low in key micro-markets like Mumbai and Bengaluru?
The supply of Grade A office space is low in key micro-markets like Mumbai and Bengaluru due to limited land availability, high development costs, and regulatory constraints. This shortage of high-quality office space can hamper the leasing momentum unless new supply comes in.
What factors could affect the housing market in 2025?
The housing market in 2025 could be influenced by a gradual decline in sales following a dip in project launches and home sales last year. Factors such as price appreciation, which has made some cities overheated, and a shift back to affordable and mid-income housing projects are likely to play significant roles.
Which top developers are expected to perform well in the residential sector?
The four listed developers—DLF, Prestige Group, Macrotech Developers, and Godrej Properties—are expected to perform well in the residential sector. They aim to achieve a collective sales target of ₹88,000 crore for 2024-25, driven by their financial capabilities and aggressive expansion plans.
What is the outlook for the retail sector in 2025?
The retail sector is expected to pick up in 2025, with higher leasing activity driven by a large supply pipeline and demand from both foreign and domestic retailers. Around 9.7 million sq ft of new retail supply across 26 Grade A shopping malls, led by Delhi-NCR, is anticipated to become operational this year.
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