Why Residential is Still the Bigger Pie in Real Estate? – Dr. Niranjan Hiranandani

 

The Indian real estate sector is a vast and dynamic industry, with both residential and commercial segments playing crucial roles. However, residential real estate continues to dominate the market, even as commercial developments gain traction. Despite changing market trends, policy shifts, and the rise of alternative asset classes, residential real estate remains the largest and most resilient segment.

In this blog, we analyze why residential real estate continues to hold the larger share of the market, incorporating insights from Dr. Niranjan Hiranandani, one of India's most influential real estate visionaries.

Residential Real Estate: The Market Leader

Dr. Niranjan Hiranandani, a pioneer in the real estate industry, highlights a striking statistic: residential real estate accounts for 96% of the total real estate market in India, while commercial real estate represents only 4%. This massive difference underscores the fundamental role that housing plays in the economy.

Unlike commercial properties, which cater to businesses, residential real estate fulfills a basic human need for shelter. This ensures that demand remains stable, regardless of economic cycles.

Key Factors Driving Residential Real Estate’s Dominance

1. Growing Urbanization and Population Expansion

With rapid urbanization and a growing middle class, demand for housing in India has been consistently increasing. Cities like Mumbai, Delhi, Bengaluru, and Pune are witnessing a surge in housing needs, driven by:

• Migration from rural areas to urban centers
• Expansion of metro infrastructure and smart cities
• Increasing job opportunities in urban hubs

Dr. Niranjan Hiranandani real estate insights emphasize that urban housing will continue to be a high-demand sector, particularly with India's projected population growth.

2. Homeownership: A Cultural and Emotional Priority

Unlike Western economies where renting is common, India has a deep-rooted cultural preference for homeownership. Buying a home is seen as a milestone of financial security and success. Families prioritize investing in real estate over other asset classes due to:

• Emotional satisfaction and security
• Long-term wealth accumulation
• Favorable government incentives for homebuyers

3. Government Policies Supporting Housing Growth

• The Indian government has actively promoted residential real estate through initiatives like:
• Pradhan Mantri Awas Yojana (PMAY) – Affordable housing for all
• Interest rate subsidies on home loans
• Real estate reforms like RERA (Real Estate Regulation and Development Act), which have boosted homebuyer confidence

Additionally, the 2024 Union Budget’s focus on rental housing marks a shift towards structured rental markets. Dr. Hiranandani suggests that if rental housing becomes mainstream, REITs (Real Estate Investment Trusts) could transform residential real estate investments.

4. REITs and the Future of Residential Investments

Currently, REITs are primarily focused on commercial properties, but Dr. Niranjan Hiranandani real estate predictions suggest that if the rental housing sector expands, residential REITs could emerge as a game-changer.

In developed economies like the United States, nearly 50% of people live in rental housing, whereas in India, rental markets remain underdeveloped. Strengthening rental housing frameworks could make residential REITs a powerful investment vehicle and further enhance the attractiveness of the sector.

5. Infrastructure and Township Development

Large-scale township developments, pioneered by visionaries like Dr. Niranjan Hiranandani, have transformed the real estate landscape. Integrated townships offer:

• Residential properties
• Commercial hubs
• Educational institutions
• Healthcare facilities

This mixed-use approach enhances the value of residential real estate by offering a complete ecosystem, making it a preferred choice for homebuyers and investors alike.

Will Commercial Real Estate Ever Outgrow Residential?

While commercial real estate is expanding, it is unlikely to surpass residential real estate in sheer volume. The key reasons include:

• Housing is a necessity – Every individual needs a place to live, whereas commercial spaces cater to business needs.
• Limited commercial demand – Office spaces are driven by industry trends, economic cycles, and work-from-home shifts, which can impact their growth.
• REITs vs. InvITs – Dr. Hiranandani notes that while REITs will grow, Infrastructure Investment Trusts (InvITs) will expand at a much faster rate due to large-scale infrastructure investments.

Conclusion

Residential real estate remains the backbone of India's property sector. Driven by urbanization, cultural aspirations, and supportive government policies, it continues to be the largest and most stable segment in the industry.

While commercial and infrastructure investments are growing, they cannot overshadow residential real estate, which caters to the fundamental need for housing. Dr. Niranjan Hiranandani real estate insights suggest that the future of real estate will be shaped by a balanced approach between homeownership, rental housing, and infrastructure growth.

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