Realty in Recovery Mode


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.
NBM&CW December 2021
The Infrastructure Development & Connectivity Poll Push

The Infrastructure Development & Connectivity Poll Push

Infrastructure development and connectivity - the buzzwords of the current Government during the 2024 General Elections - have been put on fast track, with the Government unlocking an infra blitz that spans national highways, railways

Read more ...

Women At Work : Breaking Barriers

Women At Work : Breaking Barriers

This feature highlights the important role women employees are playing in male dominated industries like civil engineering, and the contributions they are making towards their company’s progress with their professional approach and skill

Read more ...

Minimol Korulla - Head - Strategic Projects and Initiatives, Maccaferri ISEAP

Minimol Korulla - Head - Strategic Projects and Initiatives, Maccaferri ISEAP

I was born in a village in Kerala which was surrounded by a river and every monsoon the roads would become flooded. Better bridges began to be built from the 1970s, connecting us to the outside world. My encounter with the subject

Read more ...

Dola Roychowdhury - Founding Director, G-Cube Consulting Engineers

Dola Roychowdhury - Founding Director, G-Cube Consulting Engineers

The Construction Industry is one of the most male-dominated amongst all the STEM fields, though women have contributed significantly to it by continuing to crash barriers, break ceilings, and sometimes shifting their goal

Read more ...

Rubee Kongbrailatpam - Superintending Engineer, PWD, Manipur

Rubee Kongbrailatpam - Superintending Engineer, PWD, Manipur

After completing my B.Tech, I joined as a lecturer in an Engineering College, but after a year into it, I joined the State Engineering Services as an Assistant Engineer. After subsequent promotions, I’m currently serving as a Superintending

Read more ...

Sujatha Manoj - Technical Director & Geotechnical Services Leader, Australia, Beca

Sujatha Manoj - Technical Director & Geotechnical Services Leader, Australia, Beca

After graduating as a Civil Engineer from TKM Engineering College, my first challenge was to find a good job. In a city like Mumbai this was tough especially considering the fact that I had no previous work experience and had no one

Read more ...

Annapoorni Iyer - Chartered Engineer, Founder of Engosym Consultants for Infrastructure development projects

Annapoorni Iyer - Chartered Engineer, Founder of Engosym Consultants for Infrastructure development projects

I have done my B.E.(Civil) from DMCOE (2001 batch) and MBA (Infra and Contracts) from MIT, Pune. DMCOE gave me a clear vision about my career choice and I began to study each subject of civil engineering in depth. I found that my

Read more ...

Dr Barnali Ghosh - FICE, Mott MacDonald, London, UK

Dr Barnali Ghosh - FICE, Mott MacDonald, London, UK

I was first introduced to Geotechnical Engineering during my undergraduate days. What fascinated me most about this field of engineering was that soil was so unpredictable! Unlike concrete, you could not assign a set strength to it, and

Read more ...

Dr. Yogini Deshpande - Renuka Consultants

Dr. Yogini Deshpande - Renuka Consultants

I hold a PhD in Civil Engineering from Purdue University, USA (2006), a Bachelor’s Degree in Civil Engineering, and a Master’s in Geotechnical Engineering from Mumbai University. Prior to pursuing a PhD, I worked as a Senior

Read more ...

Dr. Ambika Behl - Senior Principal Scientist at CSIR-CRRI, New Delhi

Dr. Ambika Behl - Senior Principal Scientist at CSIR-CRRI, New Delhi

My journey in the construction sector started in 2005 as a technical executive in a private construction chemical company and then as a scientist in the Central Road Research Institute in the year 2007. It has been an experiential journey

Read more ...

Dr. Naveet Kaur - Senior Scientist, Indian Structural Health Monitoring Society (ISHMS)

Dr. Naveet Kaur - Senior Scientist, Indian Structural Health Monitoring Society (ISHMS)

I completed B.Tech. in Civil Engineering from Thapar University, Punjab in 2007 and M.Tech. in Structural Engineering from IIT Delhi in 2011, where I topped the 2011 batch and was awarded the NBCC Award of Excellence. I later completed

Read more ...

Atasi Das - GR Infraprojects Limited

Atasi Das - GR Infraprojects Limited

After completing my post-graduate studies in the US, I went on to have a successful career in the country, where my child was born as well. I resumed my duties at the private consultancy in the US within 6 weeks leaving my child under

Read more ...

Dr. Madhavi Latha Gali - Geotechnical Engineer, Indian Institute of Science, Bangalore

Dr. Madhavi Latha Gali - Geotechnical Engineer, Indian Institute of Science, Bangalore

My major interest lies in developing resilient geotechnical systems through various innovative reinforcing techniques. I did my Ph.D. at IIT Madras and joined IISc after working for a year at IIT Guwahati. My 20-year tenure at IISc

Read more ...

Natalia Rucinska - Environmental Director, Menard Group

Natalia Rucinska - Environmental Director, Menard Group

At the age of 24, as a young graduate with the title of MSc in Geotechnical Engineering, I dreamt big. I wanted to see what the world had to offer, and I was open to exploring the adventures that came my way. I had the itch to live a full

Read more ...

Ishita Manjrekar - Director, Sunanda Global and Board of American Concrete Institute

Ishita Manjrekar - Director, Sunanda Global and Board of American Concrete Institute

I am a Chemical Engineer with a bachelor’s degree from Institute of Chemical Technology, Mumbai (erstwhile UDCT) and I hold a post-graduate degree from RPI, New York. My professional career began in the USA where I worked as Vertical

Read more ...

Sangeen Desai - Keller Ground Engineering India

Sangeen Desai - Keller Ground Engineering India

My initial years of learning were very crucial, and though challenging, they provided me with opportunities to learn and develop new skills. With strong determination and a positive attitude, I learned to work through all the challenges

Read more ...

Saranya Subramanian - Merlin Automation Solutions

Saranya Subramanian - Merlin Automation Solutions

Hailing from a humble village background, I pursued my B.E. in Mechanical Engineering at Trichy, Tamil Nadu. Driven by my career aspirations, I enrolled in an Advanced Manufacturing course at PSG College. This course, conducted on

Read more ...

Building a New India - By Fortifying the Construction Industry

Building a New India - By Fortifying the Construction Industry

In the backdrop of India's current dynamism and ambitious goals in infrastructure development, the book sheds light on the nation's journey. The construction industry's share, constituting 13% of the global GDP, is a crucial aspect

Read more ...

Robust Realty & Infra Growth to Boost Construction Sector

Robust Realty & Infra Growth to Boost Construction Sector

Spurred by the supporting economy and favourable policy initiatives by the current government, the rejuvenated real estate and infrastructure sector bodes well for the construction business, especially as the government will provide an extra

Read more ...

Realty Year-Ender: A Year of Residential & Retail Resurgence

Realty Year-Ender: A Year of Residential & Retail Resurgence

Riding high on the positive policies, and notwithstanding global headwinds, India’s resilient real estate made a mark with its impressive performance. While the residential segment saw robust demand, supply, and sales, and was on

Read more ...

To get latest updates on whatsapp, Save +91 93545 87773 and send us a 'Saved' message
Click Here to Subscribe to Our eNewsletter.