scorecardInvestments in real estate, government capex to drive India’s investment cycle in FY24
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Investments in real estate, government capex to drive India’s investment cycle in FY24

Investments in real estate, government capex to drive India’s investment cycle in FY24
IndiaIndia3 min read
  • Household investment in real estate and government’s capital expenditure are expected to drive India’s investments in FY24.
  • A revival in housing loans by banks, rising residential prices and a 48% increase in housing sales in FY23 point to a robust real estate sector.
  • Government capex is also on a consistent rise since five years, more than tripling from ₹3.1 lakh crore in FY19 to ₹10 lakh crore in FY24.
  • Analysts say capital-intensive and cyclical stocks are expected to benefit the most from these expected spends.
India’s investments will continue to be driven by household investment in real estate and government’s capital expenditure in FY24, keeping the country’s gross fixed capital formation (GFCF) on the path of growth in the post-pandemic era.

India’s GFCF has been on an upward trajectory since the Covid-19 pandemic. According to government data, GFCF grew 25.6% in FY22 to reach ₹67.9 lakh crore, and in FY23, it grew at 17.1% to reach ₹79.5 lakh crore.

GFCF refers to the total value of investment made by businesses, governments, and other entities in acquiring new fixed assets or increasing the value of existing fixed assets within an economy. It’s used as an indicator of investment in the economy and also represents an important component of demand. A rising GFCF is an indicator of improving economic activity and a trigger for future growth.

According to analysts at ICICI Securities, household investment in real estate and government capex were the two primary drivers of growth in GFCF during FY22, growing at 30% and 29%, respectively.

Government capex has been on a consistent rise since FY19 – the budgeted capex outlay of ₹10 lakh crore in FY24 is more than triple the budgeted capex of ₹3.1 lakh crore in FY19.


“Overall, during FY24 we expect central government capex and real estate investments to continue leading growth in ‘investment rate’,” said the ICICI Securities report.

The hunger for makaan

Indians’ appetite for a roof over their heads – a makaan – remains robust, with multiple signs pointing to real estate investments by households continuing to drive the growth in GFCF in FY23.

“While an institutional breakup of GFCF for FY23 is not yet available, the latest indicators of real estate demand by households remain robust,” the report added.

There are multiple data points which underline the robustness of the real estate sector. For instance, housing loans by banks have rebounded, registering a growth of 15.4% on a 12-month moving-average basis, according to the brokerage.

In addition to this, housing sales have also risen by 48% to ₹3.47 lakh crore in FY23, pointing at a growing appetite for new residential properties, according to data from real estate consultant Anarock.

Real estate advisory firm PropTiger has also revealed that residential prices have gone up by 7% across India in the March quarter.

“Likely end of an aggressive interest rate hike cycle could potentially augment the overall investment and real estate cycle further,” the ICICI Securities report added.

Companies in these sectors will benefit the most, say analysts

As far as the markets are concerned, analysts believe that capital-intensive and cyclical stocks will benefit the most.

“We prefer BFSI (banking, financial services, and insurance), information technology, industrials, auto and cement while we are underweight on energy in our model portfolio,” said a report by Motilal Oswal.

With the Reserve Bank of India expecting a revival in India Inc’s capital expenditure cycle and analysts believing that the private sector’s capital expenditure has bottomed out, the stars are aligned for the Indian economy’s growth and outperformance of companies in capital-intensive and cyclical sectors.

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