2025 to see new growth opportunities in tier 2, 3 cities for Indian real estate sector

NEW DELHI: After witnessing a bumper growth in 2024 across residential, office and industrial domains, 2025 is likely to be a year of consolidation and continued innovation for the Indian real estate sector, a report showed on Monday.

While residential and office markets can potentially stabilise after consecutive peaks, industrial and warehousing demand can witness heightened traction, fuelled by rising manufacturing output and a thriving logistics industry, according to a Colliers India report.

In 2025, rapid urbanisation, key infrastructure project completion and industrial corridor development will create new growth opportunities, particularly in tier 2 and 3 cities.

In 2024, annual gross leasing across the top six cities reached 47 million square feet by the third quarter of the ongoing year, reflecting a 23 per cent year-on-year increase.

On the residential front, supported by stable interest rates, launches and sales across major cities of the country are likely to end on a strong note this year. Average housing prices across the top eight cities have already surged 11 per cent annually in 2024.

The first nine months of 2024 saw a 17 per cent annual growth in industrial and warehousing demand, registering 20.2 million square feet of leasing across the top five cities. Almost half of the leasing activity is expected to come from Delhi-NCR and Chennai.

Institutional inflows in Indian real estate continue to remain healthy in 2024, indicating sustained investor confidence. Of the $4.7 billion real estate investments during the first nine months of 2024, office and industrial and warehousing segment together accounted for over 70 per cent share.

Buoyed by domestic growth prospects and long-term returns, institutional investments are likely to be around $5-6 billion by the end of 2024.

“2025 could be another year, wherein multiple real estate classes ride high on investor and end-user optimism. Notably, alternative asset classes such as data centres, co-living and senior housing are likely to witness accelerated growth, reflecting a broader and steady shift in demographics and consumer preferences,” said Badal Yagnik, Chief Executive Officer, Colliers India.

A supportive regulatory environment and recent regulatory push such as SM-REITs (Small and Medium REITs) and refinement of state-specific RERA (Real Estate Regulation and Development Authority Act) regulations have enhanced transparency and institutionalisation in the real estate sector.

Policy frameworks have also driven a sense of fair pricing across real estate segments, attracting both developers and investors.

“Leasing activity from both domestic occupiers, as well as Global Capability Centres (GCCs) is likely to end on a strong note in 2024. Residential activity is expected to match 2023 levels, with strong sales across affordable, middle-income and luxury segments,” said the report.