Mint Preview: Factors Influencing the Real Estate Sector in 2025
With a decline in real estate activity, especially in the housing market, in the latter half of 2024, how will the sector fare in 2025? We delve into the key factors that could shape the year.
Real EstateOffice SpaceHousing MarketRetail SectorFundingReal EstateJan 07, 2025
All eyes are on global capability centres (GCCs), which emerged as the top contributors to office space leasing in 2024.
GCCs, along with tech companies and flexible workspace operators, are expected to continue driving the sector this year.
New firms entering the Indian market and expanding Indian corporations will also play a significant role.
According to property advisory firm CBRE India, gross leasing of commercial office space reached a historic high of 79 million square feet last year.
However, the supply of Grade A office space is limited 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 slight drop in home sales and project launches in 2024, 2025 could mark a transition from the post-pandemic high.
With a slowdown in new launches and the use of pent-up demand over the past few years, a gradual decline in sales is anticipated, as per Liases Foras Research.
Price appreciation in some cities has made the market a bit overheated, which could deter investors and homebuyers.
The enthusiasm for luxury housing projects may wane, leading to a more realistic market that focuses on affordable and mid-income housing.
How Will the Top Developers Perform?
On the residential front, the four major listed developers—DLF, Prestige Group, Macrotech Developers, and Godrej Properties—are expected to continue their growth in both sales and launches.
They aim to collectively achieve ₹88,000 crore in sales for the 2024-25 fiscal year, driven by their financial strength and aggressive expansion plans, according to analysts.
Will the Retail Sector Pick Up?
Shopping malls experienced robust leasing last year due to strong demand from retailers, despite minimal new supply.
The retail mall landscape has seen a shift towards premium offerings.
Leasing is projected to increase in 2025, thanks to a large supply pipeline and demand from both foreign and domestic retailers.
According to JLL India, around 9.7 million square feet of new retail supply, across 26 Grade A shopping malls, is expected to become operational this year, with Delhi-NCR leading the way at 35%.
Can the Funding Momentum Continue?
Institutional funding in real estate hit an all-time high in 2024, surpassing the 2007 peak by 6%, marking the return of investors.
Last year, investments worth $8.9 billion were made, representing a 51% year-on-year increase, with the residential sector taking the lead.
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 materialize over the next 3-5 years.
Frequently Asked Questions
What is the main driver of office space leasing in 2025?
Global capability centres (GCCs), tech companies, and flexible workspace operators are expected to be the main drivers of office space leasing in 2025.
What factors could hinder the housing market recovery in 2025?
A slowdown in new launches, the use of pent-up demand, and price appreciation in some cities could hinder the housing market recovery in 2025.
Which developers are expected to show strong performance in 2025?
DLF, Prestige Group, Macrotech Developers, and Godrej Properties are expected to show strong performance in 2025, with a collective target of ₹88,000 crore in sales.
What changes are expected in the retail sector in 2025?
The retail sector is expected to see higher leasing due to a large supply pipeline and demand from foreign and domestic retailers, with a focus on premium offerings.
What was the record for institutional funding in real estate in 2024, and what is the outlook for 2025?
In 2024, institutional funding in real estate hit a record of $8.9 billion, a 51% year-on-year increase. The funding momentum is expected to continue in 2025, with participation from both foreign and domestic investors.
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