India's Real Estate Market: Growth in Residential Sector, Shifts in Luxury Segments, and Rise of Flexible Workspaces

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India's real estate market demonstrated remarkable resilience and adaptability, with significant developments across residential and office sectors. According to Knight Frank India's latest report, the country witnessed a surge in residential property sales, a shift in luxury housing dynamics, and a notable rise in flexible office spaces.

Residential Market Achieves 13-Year High

The residential sector experienced a significant upswing, with home sales reaching a 13-year peak. Mumbai led this growth, recording 96,187 units sold—a substantial 11% increase from the previous year. The second half of 2024 alone saw a 6% year-on-year rise in sales. Other cities like Hyderabad and Pune also achieved record-high sales, reflecting a nationwide trend of robust demand in the housing market.

Divergent Trends in Luxury Housing

The luxury housing segment exhibited varied patterns. Homes priced above ₹1 crore accounted for nearly half of the market, with the ₹2 crore to ₹5 crore segment experiencing a remarkable 62% year-on-year surge, increasing its market share from 10% in the second half of 2023 to 15% in the same period in 2024. Conversely, the ultra-luxury segment (properties above ₹50 crore) and more affordable categories (below ₹50 lakh) saw a decline in sales volumes, indicating a consumer preference for mid-range luxury properties.

Increase in Unsold Inventory Amidst Rising Supply

Developers launched approximately 3.7 lakh units in 2024, marking an 11-year high in new supply. This surge led to an increase in unsold inventory. Despite this, the quarters-to-sell (QTS) metric improved to 5.8 quarters, suggesting healthier market conditions. Notably, the ₹2 crore to ₹5 crore segment maintained favorable QTS levels of 3.9 and 4.2 quarters, respectively, indicating strong buyer interest in this price range.

Office Market Transactions Reach New Heights

The office real estate sector also experienced significant growth, with transaction volumes reaching 6.68 million square meters (71.9 million square feet), surpassing 2019 figures by 19%. Bengaluru, NCR, and Mumbai were pivotal in this expansion, contributing 57% of the total transacted area. Bengaluru led the way with 0.90 million square meters (9.7 million square feet) transacted in the second half of 2024. Pune and Ahmedabad also achieved record annual transaction volumes, while Chennai was the only market to experience a decline, attributed to a high base effect and limited supply.

Surge in Flexible Office Spaces

Flexible office spaces emerged as a significant trend in 2024, with a 52% year-on-year growth. Flex operators occupied a record 1.47 million square meters (15.8 million square feet), driven by the increasing preference of small businesses for co-working environments. Co-working spaces dominated this segment, constituting 68% of flex transactions, up from 58% in 2023. The second half of 2024 alone witnessed a 138% year-on-year surge in flex space absorption, totaling 0.8 million square meters (8.6 million square feet).

Decline in Vacancy Rates and Rise in Rents

Office completions slightly decreased by 1% year-on-year to 2.34 million square meters (25.2 million square feet) in the second half of 2024. However, vacancy rates improved, dropping from 17.2% in the second half of 2021 to 15% in the same period in 2024. NCR and Chennai recorded the lowest vacancies at 8.4% and 6.8%, respectively. Limited supply coupled with high demand led to rental increases ranging from 3% to 7% year-on-year, with Hyderabad leading at 7%, followed by Bengaluru and Chennai at 6% each.

Conclusion

The year 2024 underscored the resilience and dynamism of India's real estate market. The residential sector's growth, particularly in mid-range luxury housing, alongside the expansion of flexible office spaces, highlights evolving consumer preferences and market adaptability. As the industry continues to navigate these trends, stakeholders remain optimistic about sustained growth and stability in the coming years.