Over the past two years, India’s real estate narrative has been shaped by resilience and constant adaptation. Despite ongoing socio-economic changes, 2021 saw India’s real estate market recover from the hurdles induced by the pandemic. In essence, the year 2022 will be the year of faster decision-making, quality real estate boom, and workplace reconfigurations as businesses gain further confidence to resume operations.
Here are the top trends to watch out for in the coming years.
Residential: Attracting a new generation of homebuyers
The residential sector witnessed strong momentum in sales as of 2021. While affordable and mid-segment housing led sales, there was also an increase in demand for luxury projects. In 2022, residential sales can be expected to witness a smooth spike. Strong government support in terms of policies, low mortgage rates, reduction in stamp duty, property registration fee, and attractive payment schemes offered by developers will continue to boost sector growth. The Real Estate Regulation Act (RERA) that provides transparency will bring further accountability to property transactions, encouraging investment infusions from NRIs.
The government’s Model Tenancy Act that bridges the trust deficit between landlords and tenants, will facilitate filling the demand-supply gap in the rental sector. The future of residential will remain aligned with the affordable and mid-segment. Also, there will be a sustained demand for larger houses in the peripheries to accommodate a luxurious lifestyle at an affordable price.
Office: Leasing demand to normalise
The challenge for occupiers will be how to redefine the role of the office, accurately gauging space utilisation and creating agile office networks for a more dispersed workforce. Companies may exercise more scrutiny when opting for office spaces—focussed on sustainability, wellness features, and green leases, among others.
Office supply in India increased from 42.1 million sq. ft in 2020 by almost 18 per cent y-o-y to touch almost 50 million sq. ft. in 2021, leading to the total office stock in the country crossing 773 million sq. ft.
As the economic recovery continues to gain momentum, concerns about the viability of hybrid working models would further ease. Renewals, re-negotiations, and the addition of flexibility options are likely to be the focus areas for the next six months. The long-term drivers of flexible space demand are likely to be intact, with smaller occupiers seeking cost-effective fully furnished spaces and large multinationals looking to build more agility into their office portfolios.
Industry and Logistics: Growth of omnichannel
Occupiers will focus on bolstering supply chains, leading to further growth in demand for the industrial and logistics space in India. Increasing investment in and adoption of smart warehousing technology can be expected to boost newer logistics facilities. Logistics space demand is to be driven by growth in e-commerce and omnichannel distribution. Third-party logistics firms (3PLs) and traditional retailers will expand and improve distribution networks. While occupiers focus on securing warehouse space near end-consumption points, they must also recognise emerging secondary consumption clusters and transportation hubs.
Retail: Leverage leasing activity
The retail industry witnessed more innovation in 2020-21 than it did in the prior decade. These innovations are pushing retailers to adopt a sharper focus on customer experiences to differentiate and get customers back to brick-and-mortar stores. There’s also an evident need for restructuring the retailer-landlord relationship. Going forward, lease agreements that are designed to absorb the impact of such structural disruptors while at the same time providing scope for rental growth and visibility on retailer performance would be preferred by retail stakeholders. While omnichannel was already a trend before the pandemic, the change in consumer shopping patterns have ensured that retailers consider omnipresence as one of the pillars of their business plan. Occupiers should capitalise on the tenant-favoured market to lock spaces. Leveraging brick-and-mortar can be expected to engage online and offline customers—incorporating ‘click-and-collect’ options into last-mile logistics. Landlords in turn should focus on rent clauses to capture market recovery, adopting a proactive approach towards experience-driven retailers.
Data Centre: Move to the mainstream, spurring demand nationwide
With emerging technologies like 5G, AI, and edge computing adding to the already high demand for data centres, the development will increase in the coming years, spurring growth in established primary markets, as well as secondary and tertiary markets. Secondary markets will see growth as developers seek to expand capacity, focussing on affordable land in favourable climates, network connectivity, clean and inexpensive power sources, and favourable tax incentives.
REITs: Influx of global institutional capital
Considering the current market landscape, and available investment opportunities, REITs will be one of the favoured investment avenues given the comparatively resilient underlying cash flows. We can expect an increase in the influx of global institutional capital and increasing retail penetration in stable income generating assets. 2022 will be an interesting year of change and innovation. We are hopeful to see how an increased focus on government reforms, accountability and transparency will shape the real estate industry and the overall economy.
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