India's Path to a $4.8 Trillion Real Estate Market Through PropTech Innovation and Addressing Affordable Housing Solutions: CREDAI-EY Report

India's real estate sector is projected to grow significantly, with its market size expected to surpass $4.8 trillion by 2047, contributing 18% to the nation's anticipated $26 trillion GDP. This growth highlights the sector’s role in India’s economic progress. A key factor in this expansion is the PropTech (property technology) segment, forecasted to grow from $10.5 billion to $600 billion by 2047. These projections were outlined in a report by the Confederation of Real Estate Developers’ Associations of India (CREDAI) and Ernst & Young (EY), released during CREDAI's 25th foundation day.

PropTech's Growing Impact on India's Real Estate Sector

PropTech, currently representing less than 5% of India’s $300 billion real estate market, is expected to grow to 12-13% by 2047. This increase indicates the growing adoption of technology to improve efficiency, reduce costs, and enhance transparency. Tools such as Artificial Intelligence (AI), the Internet of Things (IoT), and Building Information Modelling (BIM) are transforming processes and establishing PropTech as an essential component of the sector’s evolution.

PropTech's Role in Real Estate

• The adoption of PropTech is transforming operations by introducing solutions that improve efficiency and streamline processes across the value chain. These technologies impact several areas, such as:
• Operational Efficiency: AI-based tools enhance decision-making and minimize errors during project execution.
• Automation of Processes: Automation reduces manual interventions, speeds up tasks, and ensures accuracy.
• Cost Management: Data-driven insights help developers optimize operational and construction costs effectively.
• Transparency: Blockchain and IoT improve data sharing and tracking, fostering trust among stakeholders.

These advancements simplify how developers operate and provide a seamless property experience for customers.

Challenges in Affordable Housing

Despite the sector’s potential, challenges remain, especially in affordable housing. Inflation, increasing raw material costs, and escalating land prices have rendered the current affordable housing definition outdated. Presently, affordable housing is defined as homes priced up to ₹45 lakh with a carpet area of 60-90 square meters. However, this definition no longer aligns with current market conditions.

To address this, CREDAI has proposed revising affordable housing parameters and implementing policies aligned with today’s economic realities. One recommendation is to increase the affordable housing price cap to ₹90 lakh, reflecting the rising cost of living and construction materials.

Recommendations for Affordable Housing

To address the challenges in the affordable housing sector, CREDAI has put forth several essential proposals that focus on economic alignment, financial accessibility, and streamlined processes.

One of the key recommendations is the revision of the affordable housing definition. CREDAI proposes increasing the price cap for affordable housing to ₹90 lakh, reflecting the rising costs of construction materials, land prices, and inflation. This change would ensure that affordable housing remains relevant and accessible to the growing urban population.

Another crucial recommendation pertains to the flexibility in GST options for developers. CREDAI suggests allowing developers to choose between two different GST schemes at the outset of a project. The first option would be a 1% or 5% composite scheme, which would not allow input tax credits (ITC), while the second would offer an 8% or 12% GST scheme after land abatement, with ITC. This flexibility would provide developers with the ability to select the most beneficial GST scheme based on their specific project needs, helping to reduce costs and increase project feasibility.

CREDAI also recommends streamlining land acquisition processes. The introduction of zoning policies would ensure that there is sufficient land available for affordable housing projects, making it easier for developers to access the land they need to build affordable homes. These changes would address one of the primary barriers to affordable housing development.

Further, the association advocates for the development of satellite towns near metro cities. By promoting the creation of planned towns that can accommodate both residential and economic activities, CREDAI aims to alleviate congestion in crowded metropolitan areas. This would encourage regional growth, create new economic hubs, and provide affordable housing options for the expanding population outside the metros.

To improve the financial accessibility of affordable housing projects, CREDAI suggests introducing a Housing Finance Guarantee Scheme. This scheme would help developers and homebuyers access finance more easily by providing guarantees that would reduce risks and make loans more accessible, thereby encouraging investment in the affordable housing sector.

Finally, the proposal for a flexible Floor Space Index (FSI) system is aimed at reducing construction costs. By allowing developers to pay for FSI in a flexible manner, this initiative would promote cost-efficient building practices and enable the construction of more affordable homes in urban areas.

Urbanization and Regional Growth

India’s urban population is expected to grow significantly, intensifying the demand for housing and infrastructure. Balanced urban development is essential to address this challenge. Planned satellite towns are a practical solution to ease the strain on metro cities while providing accessible and affordable housing.

These towns can become centers for economic and residential growth, offering an alternative to crowded urban areas. This strategy aligns with the broader goal of achieving "Viksit Bharat 2047," which envisions a developed India by its centenary of independence.

Industry Leaders on Future Growth

Boman Irani, President of CREDAI, highlighted the opportunities arising from urbanization, technological advances, and evolving buyer needs. He emphasized the importance of collaborative efforts to realize the vision of a developed India by 2047.

Manoj Gaur, Chairman of CREDAI, stressed the need for policies addressing housing shortages and urban congestion. He advocated for redefining affordable housing and supporting planned urbanization to meet growing demand.

Real Estate as an Economic Catalyst

India’s real estate sector is at the verge of a transformative phase, driven by PropTech innovations and the growing need for affordable housing. As technology integrates more deeply into real estate operations, it will enhance efficiency, transparency, and cost management, reshaping the industry for the future. At the same time, addressing the challenges in affordable housing, such as rising construction costs and outdated definitions, is crucial to ensuring that housing remains accessible to a growing urban population.

Strategic urban planning, including the development of satellite towns and the redefinition of affordable housing, will help manage urbanization effectively. With the right policy reforms, financial solutions, and technological advancements, India’s real estate sector will play an essential role in the nation’s economic trajectory, contributing significantly to its $26 trillion GDP by 2047.

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