India's recently concluded trade agreement with the United States is poised to deliver a comprehensive boost to the national economy, with significant positive implications for the real estate sector through enhanced foreign investment and improved market sentiment.
Key Details of the Trade Pact
The landmark trade deal was finalized on February 2, marking a pivotal moment in bilateral relations. Under the agreement, the United States has committed to reducing tariffs on Indian goods to 18%, a substantial decrease from the previous rate of 50%. This strategic move grants India a competitive advantage over major export competitors, including China, Indonesia, Vietnam, and Bangladesh.
Impact on Real Estate and Foreign Investment
The trade agreement is expected to indirectly bolster the real estate market by stimulating foreign direct investment, particularly in commercial properties. Increased capital inflows and rising demand for office spaces, especially from global capability centers, are anticipated to benefit the sector substantially.
A detailed report by Antique Stock Broking highlights that this development removes a significant overhang that had persisted in Indian markets for nearly 15 months. The report states, "This development is significantly positive for Indian equities as FPI equity outflow of USD 34 billion since October 2024, the highest among emerging markets, may reverse. The US accounts for approximately 41% of FPI assets under custody, and valuation premiums relative to other emerging and developed markets are near the long-term average."
The analysis further indicates that sectors with relatively high foreign portfolio investor ownership, such as real estate, telecommunications, and transportation, are likely to be primary beneficiaries if foreign inflows resume. The tariff reduction is projected to mitigate risks for nearly USD 50 billion of Indian exports, particularly in labor-intensive industries like textiles, gems and jewellery, machinery, chemicals, plastics, and agriculture.
Market Sentiment and Sectoral Outlook
Market participants remain optimistic about Indian equities, with financials, capital goods, defence, and consumer discretionary stocks identified as key overweight sectors. This positive outlook is driven by improving external conditions and steady domestic growth.
While the full details of the agreement are yet to be publicly disclosed, US President Donald Trump announced on the social media platform Truth Social that reciprocal tariffs on Indian goods have been sharply reduced to 18%. In exchange, India has committed to eliminating tariffs and non-tariff barriers to zero.
Government Assurance and Sectoral Opportunities
Commerce and Industry Minister Piyush Goyal confirmed that a joint statement detailing the pact will be issued shortly. He assured that the agreement would create significant opportunities while safeguarding sensitive sectors. Goyal emphasized, "The deal will protect the sensitive sectors, the interests of our agriculture and our dairy sectors in full respect."
Goyal added that the agreement would unlock major opportunities for labor-intensive sectors, including textiles, plastics, apparel, home décor, leather and footwear, gems and jewellery, organic chemicals, rubber goods, machinery, and aircraft. This broad-based approach aims to enhance India's export competitiveness and stimulate economic growth across multiple industries.
