India’s real estate sector is showing strong resilience across key segments, with lower residential inventory and increased commercial office absorption paving the way for sustained cement demand. A recent expert call with Shobhit Agarwal, MD & CEO of Anarock Advisors, highlighted key trends shaping the industry.
Commercial Office Absorption at Multi-Year High
The commercial office segment recorded net absorption of 50 million sq. ft. in FY24, surpassing new supply of 48.1 million sq. ft. for the first time since 2017. Notably, the demand is now more diversified, with ITES’ dominance dropping from 42% in FY19 to 28% in FY24. BFSI and co-working spaces have gained traction, contributing to a more balanced market. However, Hyderabad faces potential oversupply risks due to aggressive expansion.
Residential Inventory at Record Low, Sales Tripled Since Pandemic
The residential market continues to thrive, with sales tripling since the pandemic. Inventory levels have dropped to just 14 months, assuming no new launches, reflecting strong demand. The sales value surged 16% YoY, with Mumbai Metropolitan Region leading at 41% growth, while Kolkata lagged at 2%. New supply declined sharply in Pune (28% YoY) and Hyderabad (24% YoY).
Luxury and ultra-luxury housing have witnessed exponential growth, now accounting for 17% of total supply—over 3.4 times the level in 2018. While demand remains strong, this segment faces the highest risk due to its expanded share in the market.
Retail and Warehousing Steady, But Occupancy Declines
Retail leasing absorption stood at 6.5 million sq. ft. in FY24, flat YoY, while new completions fell significantly to 1.1 million sq. ft. from 5.3 million sq. ft. Occupancy rates in the segment declined below 10% due to increased supply. Meanwhile, the warehousing sector has grown at a 13% CAGR from FY18-FY24, fueled by rising demand from large-scale data centers amid rapid digitization.
Cement Sector Set to Gain From Real Estate Boom
The robust performance of real estate, particularly in the residential sector, bodes well for cement demand. With affordability ratios improving—home loan pay-to-income ratios now at 38, similar to FY17—homebuyers are increasingly active. Lower inventory levels and steady sales indicate sustained cement consumption growth, reinforcing optimism in the sector.
As the real estate cycle continues its upward trajectory, the cement sector is poised to benefit, making it a space to watch for investors and industry stakeholders alike.
