Office space leasing in India’s major cities are defying the global downturn, recording steady growth even as marquee international hubs like New York, Seattle, Boston, Hong Kong, and Shanghai have seen rents slide over the past five years. According to a report by workplace solutions firm Vestian, office rentals in India rose by 3.8% to 8.2% year-on-year in 2024, bucking the global trend of subdued demand and falling prices.
This resilience is underpinned by strong leasing activity from the information technology sector and global capability centres (GCCs). Office leasing touched a record 70.7 million square feet in 2024, registering a 16% annual growth. While remote work has persisted post-COVID, India’s unique cost advantage — particularly sub-dollar rentals — continues to draw multinational corporations seeking cost-efficient expansion. These rentals, priced below $1 per square foot per month, are most prevalent in micro-markets such as Pune, Hyderabad, and Chennai.
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What’s fuelling office space leasing?
Globally, only a few Western cities such as London and Miami have mirrored India’s upward trajectory, with rent hikes of 31% and 53%, respectively. Yet, India’s office market stands out for reasons beyond rising rents — its affordability, rapid urbanisation, and access to a large, young, and tech-savvy workforce are making it a preferred destination for global firms.
In contrast, international office markets continue to face headwinds due to rising vacancy rates and evolving workplace strategies, including downsizing and a shift toward flexible work arrangements.
A broad real estate resurgence
India’s real estate sector is not just thriving in office rentals. It is experiencing a broader boom, emerging as one of the economy’s most vital pillars. With a current market size of $493 billion and a contribution of 7.3% to GDP, the sector is expected to grow to Rs 5.8 trillion by 2047 — accounting for 15.5% of the nation’s economic output. It is also the second-largest employment generator after agriculture, contributing around 18% to total employment.
This surge is driven by a mix of urbanisation, increasing disposable incomes, expanding infrastructure, and rising demand across residential, commercial, logistics, and data centre segments.
Changing dynamics in housing and retail
The residential market has undergone a post-pandemic transformation, with buyer preferences shifting sharply. Affordable housing — defined as homes priced below Rs 50 lakh — has seen its share in total sales fall from 54% to 26% over the past decade. In contrast, high-value homes priced above Rs 1 crore now account for 43% of sales, up from 16%, indicating rising demand among affluent buyers. Mid-range housing (Rs 50 lakh to Rs 1 crore) has remained steady at 30–37% of overall sales.
On the commercial side, the rise of hybrid work has prompted companies to rethink their real estate strategies. Developers are responding by incorporating sustainability features and smart technologies to enhance operational efficiency and appeal to environmentally conscious tenants.
The retail segment, too, has bounced back with vigour, propelled by “revenge shopping,” influencer-driven marketing, and Gen Z-targeted campaigns. Retailers are increasingly investing in experiential formats, blending physical and digital platforms. Tier-2 and Tier-3 cities, fuelled by growing incomes and digital penetration, are now emerging as new growth frontiers for retail real estate.
Investment climate — Promise and pain points
The surge in real estate activity has attracted growing investor interest. But sustaining this momentum will require addressing key financing challenges — particularly for developers and home buyers.
For home buyers, access to affordable financing from banks and NBFCs is essential to keep demand robust. For developers, funding remains critical across the lifecycle of a project, from land acquisition to completion. However, financing hurdles persist. According to a Knight Frank report, securing funds for land purchases remains a challenge due to RBI regulations that restrict direct bank lending for this purpose. Developers are often forced to turn to high-cost alternatives such as Alternative Investment Funds (AIFs) and private equity.
Policy reforms could unlock growth. Introducing track record-based interest rates, or developer-specific land financing products, would help creditworthy builders reduce costs and boost project execution.
Equally important is tackling high stamp duties and registration fees on loan securities, which currently act as a drag on housing sales. In some states, stamp duties on loans can go as high as 2%. Mechanisms like a rolling security structure or a Master Facility Agreement could reduce transaction costs, allowing developers to reuse existing collateral across multiple loans. This would particularly benefit the affordable housing segment.
Navigating future risks
Despite its strong fundamentals, India’s real estate sector is not immune to external shocks. A global economic slowdown, domestic inflationary pressures, or interest rate hikes could dent investor sentiment and curb demand across segments.
Rising borrowing costs could squeeze developer margins, delay project timelines, and push property prices higher — a risk for both developers and buyers. Nonetheless, most industry stakeholders believe such disruptions will be short-lived. With timely government intervention, especially in easing credit access and rationalising transaction costs, the sector is well-positioned to sustain its upward momentum.
In an uncertain global environment, India’s real estate sector is offering a rare combination of affordability, scale, and growth — making it a compelling story in the evolving global property market.