India’s property market is heating up, with land sales spiking nationwide. This is due to a surge in demand for residential plots, especially high-end ones. Poised for a land rush, India’s property developers are acquiring a staggering 3,000 acres of land by FY24. This aggressive land-buying spree fuels the momentum for new plot project launches augmenting India’s land sale.
A Surge in Land Transactions
According to market sources, India’s land acquisition activity is surging, with developers acquiring a notable 2,258 acres in the first nine months of FY24. The growth trajectory is on a steady incline, with the developers in the industry suggesting another 600-700 acres could be added by quarter’s end. Industry sources have reported a surge in land transactions during the fiscal year 2023-24. Developers and other entities concluded 101 separate deals, acquiring nearly 2,989 acres of land. This marked a significant 58% increase compared to the previous year.
Both listed and unlisted entities have been actively involved in land transactions, driven by the availability of land parcels from corporates, government entities, other landowners, and developers, especially in the Delhi-National Capital Region and the Mumbai Metropolitan Region. Gurgaon has seen land transactions worth over ₹3,000 crore in the last two years alone. Most of these transactions occurred in the two major metro cities, Hyderabad and Bengaluru. The Chennai plot sale market is also becoming increasingly important in the real estate sector.
Beyond the Metros: The Rise of Tier 2 & 3 Cities
Beyond the metros, a fascinating trend is emerging. Market sources reveal a shift in land acquisition, with a significant number of deals (18 deals for over 1,853 acres) being finalized in various tier 2 and 3 cities. This contrasts with just over 83 deals for about 1,135 acres in the top seven major metropolitan areas. This highlights the burgeoning potential of these developing markets, fueled by factors like improved infrastructure and expanding economic opportunities.
Transitioning from Asset Light to Asset Heavy: A Strategic Shift
There’s a significant shift in developer strategy. In 2019-2021 and early 2022, developers favored asset-light joint development projects (JDPs). This model appealed to landowners seeking to monetize their assets and smaller developers facing funding constraints. While some JDPs were successful, many faced challenges related to governance, profit sharing, and property rights, leading larger developers to exit.
The trend of developers in FY 23-24 has been returning to the market, this time opting for complete land acquisitions or buyouts of their former JDP partners. This shift coincides with a record-breaking year for sales (5.3 lakh units in 2023) exceeding new supply (4.5 lakh units). Anticipating future demand, real estate players are actively building their land banks. This surge in land acquisition, coupled with the existing demand-supply gap, is contributing to rising property prices.
On the Horizon: Unveiling Proposed Projects
A significant portion (around 80 deals) of land acquisitions in FY24, encompassing roughly 2,252 acres, are earmarked for upcoming residential projects. This includes plotted developments and townships, catering to a variety of housing needs. Industry sources say these residential projects are planned for major cities like NCR, Chennai, Pune, Bengaluru, MMR, Hyderabad, Mysuru, Ayodhya, and Jaipur.
The explosion in land deals highlights the buoyancy of the Indian real estate market, particularly in the luxury segment. However, experts warn that an exclusive focus on luxury housing could overlook the persistent demand for affordable options, especially among first-time homebuyers in smaller cities.
Looking ahead, the Indian real estate sector needs to achieve a healthy equilibrium. This means catering to the high-end market while also ensuring there are sufficient affordable choices. Strategic government policies and incentives can be a game-changer. By encouraging developers to participate in inclusive development projects, these measures can pave the way for a more sustainable and equitable real estate growth story.