The Real Estate sector is on a recovery path, paving the way for sustainable growth in the coming years.
By Vinod Behl

With the receding pandemic, fast recovering economy, and a thriving job market, there are signs of promising times ahead for the real estate market, especially as the recovery in the residential segment is very encouraging.

The residential segment got a massive jolt due to Corona pandemic, with housing sales falling by 37 percent. But despite facing a slump in April-May 2021, demand in June rebounded to the levels of March. Further, in Q3, ‘21, the housing market rebounded faster, with sales registering 59 percent yoy increase. Along with sales, new launches also picked up in Q3. Affordable and mid-priced homes costing less than ₹45 lakhs and ₹45- 75 lakhs, respectively, had a combined share of 68 percent of sales, according to a PropTiger report.

Home affordability has been a major sales propeller. Lowest ever home loan rates, stagnant range bound prices, interest subsidy under PMAY, zero GST on ready inventory, and deals and discounts by developers have contributed to improvement in affordability. According to JLL, Home Purchase Affordability Index 2021 breached the affordability threshold of 100 this year as household incomes witnessed sharp increase of 7-9 percent over the 2020 base.

Several new trends like home buyers’ preference for bigger, more spacious homes, plotted developments, mixed-use and ready homes were also reasons for the robust recovery of residential real estate. With wellbeing and safety being top priorities now among home buyers, demand for bigger homes with home office facility and even a terrace garden has gone up significantly.

Home buyers are also preferring low-rise independent floors for well-being, safety and privacy - a trend which is very pronounced in the NCR market. Especially, the premium lifestyle floors in gated communities that offer both privacy and community living with the best of amenities. Moreover, floors are generating big demand as due to their faster delivery, development risk is quite low. DLF has sold 551 independent floors worth ₹1200 crore in Gurgaon since October 2020.

Gurgaon-based Smart World Developers generated sales of ₹2000 crore within one month of its launch of two luxury floors projects. Trehan Group, which launched 320 luxury independent floors, is getting a good response. Mumbai has emerged as a prime residential market for high-end luxury homes with a record transaction of over ₹4000 crore in H1 2021.

Going forward, there will be several growth drivers for the residential segment. These include higher disposable income, growth in IT spending, growing end-user market with the rise of informed and empowered property buyers, improving economy and job market, and rising foreign investment in real estate.

During the lockdown, there have been extra household savings of $200 billion, boosting disposable income. Hiring activity has surpassed pre-pandemic levels, led by IT, telecom, internet service provider, and retail sectors. On the FDI front, despite the second Corona wave, real estate could garner FDI worth $2.7 billion. Anarock estimates home sales touching 3.19 lakh units in 2023 – the third highest since 2913. But despite these promising factors, challenges remain in the form of large unsold inventory, home buyers reluctance to buy under construction homes, and uncertainty about the pandemic continuing.

The Commercial / office segment which saw a decline of 35 percent in office space leasing due to closure of offices and Work from Home, is staging a recovery, with net absorption jumping by 63 percent in Q3 2021, while new completions have gone up by 59 percent over the previous quarter, according to a Knight Frank report. Around 35 million sq ft of Grade A office space was completed in January-September 2021, registering 53 percent increase, compared with the same period last year. In 2022, the total office space absorption is expected to touch 26.8 million sq ft.

Going forward, demand for office spaces will continue to expand, backed by consolidation and expansion of office spaces by occupiers and increasing demand for satellite offices. The office segment continues to attract the highest FDI, which will help strengthen its recovery. Further, according to CBRE, flexible office space will be a major booster for office real estate. In H1 2021, flexible office space stock share jumped to 15 percent, up from 5 percent in 2016-17 and is expected to grow by 10-15 percent yoy over the next three years. As per Cushman & Wakefield, leasing of flexible workspace by corporates rose by 73 percent in H1 2021 and is expected to top 50,000 seats in CY 2021.

The Retail segment suffered the most as malls remained shut for almost one and a half years. This is clearly evident from the fact that only 5 new malls, spanning 2.75 million sq ft began operations in 2020. According to industry estimates, over a dozen new malls spanning 5.9 million sq ft are likely to be completed by 2021-end. According to Anuj Puri, Chairman, Anarock, tier 2-3 cities will see new malls in the next financial year. Following the second wave of the pandemic in April- May 2021, malls suffered a loss of ₹3000 crore, with e-retail and high-street retail growing significantly. By now, losses for malls have further gone up significantly. And though malls are operational, footfalls are still low, and recovery will be challenging in the coming months.

Alternate asset classes like logistics and warehousing and data centres have seen demand go up. Warehousing stock in top 8 cities added 27 million sq ft to reach a total of 238 million sq ft in 2020, compared to 211 million sq ft in 2019. Industrial spaces witnessed 13 percent yoy growth. Demand will be supported by e-commerce and third-party logistics (3PL) which contributed to 35 percent of net warehousing absorption. Infra boost by the government has been a demand driver of logistics and warehousing.

Covid helped push digital economy, which, in turn, has boosted data center business. Going forward, data centre landscape will evolve owing to growing reliance on digital technology, 5G roll out, IoT linked devices, cloud adoption, and data localisation. According to JLL, the data centre industry will see its capacity doubling from 499 MW IT load in H1 2021 to 1008 MW by 2023, generating demand for over 5 million sq ft of real estate.

Though the real estate recovery is still in its early stage, yet several positive and enabling factors like improving economy and job market and the growing trend of home ownership and buying pre-leased commercial properties for monthly returns, will help speed up the recovery towards sustainable growth.
The real estate sector, especially the residential segment, which showed great resilience against the Covid pandemic to register a smart recovery, is now facing a double whammy. The long-drawn Ukraine-Russia war has led to a sharp increase in

Read more ...

Cities are a product of interactive life forms; they have multi-pronged dimensions involving people and other life forms, with dynamic interactions. Due to such dynamics and the complexity of ever-changing interactions, smart cities cannot be

Read more ...

Er. Vivek Abhyankar writes on the amazing architecture and planning, structural design, and performance, of many forts in India, along with their brief history, type, components, functioning, planning, and construction methodology

Read more ...

Real Estate and infrastructure are the major drivers of the economy with their significant contribution to the country’s GDP. As such, the construction finance is critical to ensure that real estate and infrastructure development

Read more ...

The Kartarpur Corridor between India and Pakistan connects the historic gurdwaras of Dera Baba Nanak in Gurdaspur District of Punjab (India) with Gurdwara Darbar Sahib, Kartarpur, in the Narowal District of Punjab (Pakistan)

Read more ...

Authors Er. Vivek Abhyankar, Founder of SGAWings Civil Engineering Consultant and Advisor (OPC), Mumbai & Dr. N. Subramanian, an award-winning author, consultant, and researcher, based at Maryland, USA, present a brief review

Read more ...

The Modi government’s ambitious and aggressive ₹6 trillion National Monetisation Plan (NMP), high on intent with enabling framework, holds the promise of success, notwithstanding various challenges on

Read more ...

34-InfraDespite their relatively small markets, Bhutan and Maldives provide Indian construction companies a dynamic space for infra development with an appreciable degree of social and cultural familiarity

Read more ...

Very few places in our world are more educational than museums. Museums are storehouses of knowledge and help us understand our world better. As institutions at the heart of society, museums have the power to define

Read more ...

Investors are looking to hedge their risks by diversifying their portfolios with Alternative Investments such as Commercial Real Estate. An alternative investment is one which is outside the traditional

Read more ...

Notwithstanding some bright spots, the flagship Smart Cities Mission (SCM), which marked its 6th anniversary on June 25, is yet to live up to its tall promises. Their sub-optimal performance, precipitated by

Read more ...

Indian construction companies and equipment manufacturers should explore opportunities outside the country as India has the potential to become a global manufacturing hub. Reports Saeeduddin Faridi

Read more ...

TDR policy faces many constraints and challenges and several reformative steps are needed at the policy level to bring momentum to it. Though the concept of TDR (Transferable Development Rights), largely aimed

Read more ...

With the launch of Digital Roof 4.0 (DR4.0), a new day has dawned in the Indian construction sector. Digital Roof 4.0 is a multi-faceted engineering and management company set up with the avowed intention

Read more ...

Focusing on infrastructure as a key driver of economic growth, the government is embarking on a massive PSEs asset monetisation programme as part of Infrastructure Vision 2025. This ambitious programme is meant

Read more ...

Cities all over the world are rapidly changing and expanding, and proper urban planning is now more important than ever before. Singapore 'urban model' is a classic example of highly targeted urban planning which has transformed Singapore's

Read more ...

In terms of its contribution to the global economy, the construction industry is at the forefront with a staggering annual share of 11- 12 trillion dollars. It is a large employer with more than 300 million people

Read more ...

For years, construction has lagged behind other industries regarding technological advancement, disruption and digital automation. Finally, this is starting to change. The reducing cost of digital enablement

Read more ...

At a time when India is undergoing rapid urbanisation, integrating technologies like AI and IoT will help in faster and better planning and designing of smart, tech-enabled cities. Technology is transforming the real

Read more ...

×
Sign-up for Free Subscription
'India Construction Week'
Weekly e-Newsletter on Construction Industry
Get the latest news, product launches, projects announced / awarded, government policies, investments, and expert views.