India's Commercial Real Estate Sector: Defying Global Trends
India's commercial real estate market has demonstrated remarkable resilience and growth, attracting $5.4 billion in investments, despite global economic challenges.
Commercial Real EstateGccIndiaInvestmentTier 2 TownsReal EstateJul 19, 2024
The demand from Global Capability Centers (GCCs) has become a pivotal driver of growth within India's office sector. As global companies seek efficient outsourcing solutions amid economic pressures, India's GCCs are rapidly expanding. Projected to grow at a compound annual growth rate (CAGR) of 10%, the GCC industry is expected to reach $715 billion by 2027, up from the current $465 – 510 billion. India holds a 30% share of the global GCC market and employs up to 2 million professionals.
Today, only 40-45% of Fortune 500 companies have GCCs, providing significant scope for penetration. Given India's demographic advantage, with an estimated 80-90 million people to be added to the working-age population by 2027, the demand for Grade A commercial real estate is expected to increase. In fact, estimates suggest that India will have 3.5-4 million workforce employed in GCCs over the next 3-4 years, implying a doubling of the Grade A space required.
Another significant trend is the rising contribution of domestic investors and capital flowing into this space, with a sharp decline in foreign fund activity in India given global interest rate situations and geopolitical uncertainties. Despite these challenges, the Indian real estate sector remains robust, driven by increasing share of a new class of investors ultra-high-net-worth individuals and family offices. These investors are drawn to the tangible security of asset-backed investments and the regulated environment of Alternative Investment Funds (AIFs), significantly impacting the real estate market with approximately Rs. 3 trillion already invested.
Looking forward, there is a huge opportunity for Tier 2 towns to emerge as new centers of growth and commercial real estate investment. While we've made good progress in transportation infrastructure, there is an urgent need to upgrade the urban infrastructure in these cities to increase livability and attract both businesses and employees. A shift is underway, with pioneering firms redirecting their focus to Tier 2 cities, which have seen a twofold increase in investment flow, primarily for the acquisition of undeveloped land parcels.
Information
Boston Consulting Group (BCG) is a global management consulting firm that partners with clients from the private, public, and not-for-profit sectors to identify and solve their most pressing challenges.
Rishabh Goel is the Managing Director and Partner at BCG, and Yashi Tandon is the Lead Knowledge Analyst, Team Lead, at BCG.
Frequently Asked Questions
What is the current size of the GCC industry in India?
The current size of the GCC industry in India is $465-510 billion, expected to reach $715 billion by 2027.
What is the share of India in the global GCC market?
India holds a 30% share of the global GCC market.
What is the estimated number of workforce employed in GCCs in India by 2027?
Estimates suggest that India will have 3.5-4 million workforce employed in GCCs over the next 3-4 years.
What is the current investment in the Indian real estate market by ultra-high-net-worth individuals and family offices?
The current investment in the Indian real estate market by ultra-high-net-worth individuals and family offices is approximately Rs. 3 trillion.
What is the trend in investment flow in Tier 2 cities in India?
Tier 2 cities in India have seen a twofold increase in investment flow, primarily for the acquisition of undeveloped land parcels.
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