The construction equipment and machinery sector is navigating a complex landscape of challenges and opportunities.
Deepak Naidu,
How would you describe the current state of the real estate market in your region?
The Mumbai real estate market is currently experiencing a robust and dynamic phase, marked by substantial growth and a series of positive trends that are projected to persist throughout 2024. The market is being propelled by various factors, such as a growing population, Mumbai’s status as a financial hub, affordable housing initiatives, and ongoing infrastructure development. These factors are driving increased demand for both residential and commercial properties. Government support through subsidies and incentives for affordable housing projects is making homeownership more accessible to low and middle-income families. The real estate sector has also attracted substantial foreign investment, contributing to its vitality. Recent data underscores this upward trajectory, with January 2024 witnessing a record-breaking 10,901 property registrations, generating ₹746 crores in state revenue. This increase in transactions signifies growing investor confidence and underscores Mumbai’s economic significance. As infrastructure projects improve connectivity and open up new areas for development, the real estate market in Mumbai appears poised for continued expansion and innovation in the coming years.
What factors do you believe have contributed most significantly to the recent boom in real estate?
The recent surge in the real estate market can be attributed to several interconnected factors. Rapid urbanization and demographic shifts have played a crucial role, with millions migrating to cities in search of better opportunities, creating substantial demand for residential properties. The expanding middle class and growing working-age population have further fuelled this demand. Technological advancements have revolutionized the property buying experience, making transactions more seamless and efficient. Government initiatives like ‘Housing for All by 2022’ and the implementation of RERA have boosted consumer confidence and spurred development. The thriving commercial and industrial sectors have increased demand for office spaces and industrial properties in major cities. Infrastructure development, including improved transportation networks, has made suburban areas more attractive to buyers seeking better lifestyles. While economic downturns can temporarily slow growth, the real estate sector has consistently demonstrated resilience over time. Notably, real estate and ownership of dwellings have contributed over 7% to India’s Gross Value Added (GVA) over the past decade. The outlook remains positive, driven by ongoing urbanization and its transformative impact on the housing industry. This sustained urban growth continues to fuel demand, ensuring the sector’s robust performance and long-term potential.
How do you look at the sector in terms of the construction equipment and machinery used?
The construction equipment and machinery sector is navigating a complex landscape of challenges and opportunities within the construction industry. Although there was nominal growth in value added and gross output in 2023, much of this increase seems driven by price inflation rather than volume growth. The sector is dealing with volatile material prices, rising labour costs, and a persistent shortage of skilled workers, all of which impact the efficiency and productivity of construction equipment usage. High interest rates and stricter lending standards are also affecting construction activity, potentially influencing decisions on equipment purchases or rentals. However, the outlook for 2024 is more promising, with anticipated growth in construction related to manufacturing, transportation infrastructure, and clean energy projects. This expected expansion, driven by significant legislation such as the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS Act, is likely to increase demand for advanced and specialized construction equipment. The Associated Builders and Contractors’ positive expectations for increased profit margins and staffing levels in 2024 suggest a potential rise in equipment investment and utilization. As the industry adapts to these evolving dynamics, there may be a growing emphasis on more efficient, technologically advanced, and sustainable construction machinery to meet the sector’s changing needs.
How has the demand for residential versus commercial real estate shifted in recent times?
The demand for residential and commercial real estate has undergone significant shifts in recent times, particularly in 2023. The residential sector experienced robust growth, driven by favourable economic conditions, higher disposable incomes, and increased NRI investments. Notably, there was a marked shift towards more expensive properties, with luxury home sales nearly doubling in the first ten months of 2023 compared to the same period in 2022. For the first time, sales of luxury homes (priced above Rs 1 crore) surpassed those of affordable homes in the July-September quarter. The demand for top-end homes reached a decade-high in 2023, with sales of properties priced above Rs 1.5 crore increasing by 6% compared to 2022. This trend persisted despite India being ranked as the 14th costliest housing market globally and despite elevated interest rates. The shift towards larger, more expensive homes reflects changing consumer preferences and a resilient real estate market. While specific data on commercial real estate wasn’t provided, the strong performance of the residential sector, particularly in the luxury segment, suggests a dynamic real estate landscape with evolving demand patterns across different property types.
What challenges do you foresee for the real estate market in the next 5-10 years?
Despite its current resilience and growth, the real estate market in India is likely to encounter several challenges over the next 5-10 years. Rising property prices, expected to increase by 10-15% in 2024 alone, may lead to affordability issues for many potential buyers. Additionally, the escalating costs of building materials will continue to exert upward pressure on property values, potentially slowing the pace of new developments. While current low interest rates have supported demand, any significant rise in home loan rates could dampen buying sentiment.
The market may also struggle to maintain the high demand for luxury properties, as economic uncertainties and potential global downturns could impact high-end purchases. The sector will need to adapt to changing consumer preferences, especially in light of post-pandemic lifestyle shifts. Environmental concerns and the need for sustainable development may also present challenges, requiring developers to invest in eco-friendly technologies and designs.
Finally, the real estate market will need to navigate potential regulatory changes and government policies aimed at balancing growth with affordability and urban planning needs.
How is your company adapting to new trends and technologies in the real estate sector?
At Ashwin Sheth Group, we are at the forefront of embracing new trends and technologies in the real estate sector. We recognize the growing importance of smart home automation, especially among tech-savvy millennials and GenZ. With the Indian smart home market projected to reach USD 25.64 billion by 2025, we are integrating cutting-edge IoT technologies into our luxury residences. These smart systems allow residents to control various aspects of their homes through smartphone apps or voice commands, maximizing convenience and control. Security is a top priority for us, and we are integrating advanced features such as facial recognition, biometric authentication, and smart surveillance systems to ensure the safety of our residents. Our commitment to sustainability and energy efficiency is evident through the use of solar panels, water-saving technologies, smart lighting, and adaptive thermostats in our projects.
