Despite disruptions caused by the pandemic, there are overriding factors that inspire confidence of both domestic and foreign investors, including NRIs, in the realty market.
BY VISHAL DUGGAL
As the Indian economy shows signs of recovery after two turbulent years reeling under the disastrous impact of the Covid-19 pandemic, the country’s real estate sector too is gradually acquiring growth momentum. Though the outbreak of Omicron has refuelled worries, the
demand for real estate is unlikely to ebb; rather, it will accelerate across categories. The country has emerged wiser since tackling the crisis since 2020 and even if the need arises to observe strictest adherence to counter-pandemic measures such as lockdown, business activities including those related to real estate are unlikely to come to a grinding halt. In fact, 2022 may witness unleashing of the demand which has been muted over the past two years as property sales and prices had remained stagnant. How has this change come about, promising happy days ahead for India’s real estate market?
INCREASED TRANSPARENCY IN REALTY DEALS
The enforcement of the Real Estate Regulation and Development Act 2016 (RERA) has infused much-needed transparency in the realty sector, which has now embraced an organised, regulated setup. This has reassured NRIs and drawn increased investment from them as the RERA regime has managed to keep fly-bynight operators at bay.
CAPITALISING ON A HEALTHY ECONOMIC OUTLOOK
According to the latest Global Economic
Prospects report released by the World Bank, the Indian economy is expected to expand by 8.3 percent in FY 2021-22, riding on a host of aspects such as “ongoing structural reforms, a better-than-expected financial sector recovery, and measures to resolve financial sector challenges despite ongoing risks”.
The real estate industry, an important contributor to the country’s economic prosperity and the second-largest sector in terms of employment generation after agriculture, is all set to benefit from the positive economic outlook and evolving trends. The Knight Frank report titled “Real
Estate Outlook 2022” corroborates this renewed optimism in the growth of the property market in the country. According to this report, residential real estate has already witnessed a recovery, riding on the growing trend of work from home (WFH), which has become a new work culture during the pandemic.The report projects around 5 percent capital value growth for the residential property segment in the country in 2022.
Property advisory company Anarock too estimates that prices may appreciate in the range of 5 to 10 percent in residential realty. As per its projections, new supply and sales of homes might reach 2019 levels in 2022. Flexible work options have driven the demand for a second or a larger home with better amenities among professionals who are now looking for wider work-life choices. They evince interest even in the city’s
periphery which offers a wider choice of large, open areas.
Similarly, homes complementing lifestyles have become a preferred choice with ultrahigh net worth individuals (UHNIs) and nonresident Indians (NRIs) who wish to own a piece of property in their motherland.
According to Anarock, between January and September 2021, the residential sector saw a hike of 27 percent in new supply visà- vis the full-year supply in 2020. During this period, 1.45 lakh housing units were sold, marking a 5 percent increase over the sales in 2020. Among other factors, continuing low interest rates on home loans, stamp duty and affordable prices have expanded the realty growth in tier 2/3 cities too. This has further encouraged investment by Indian expats who stand to benefit from the rupee-dollar exchange rate in property transactions.
COMMERCIAL REALTY NOT LAGGING BEHIND
Commercial real estate too has witnessed healthy growth. As per a report by commercial real estate services and investment firm CBRE, office leasing activity reached 13.5 million sq ft in Q3 2021, growing at about 140 percent quarter on quarter. The demand for office space has received a boost on the back of the upswing in Information Technology (IT) companies’ hiring momentum.
Further, uncertainty arising in the wake of the pandemic has prompted businesses to opt for co-working spaces and hybrid models which offer enhanced flexibility and affordability in operations and cost components. The new trend is catching up not only in metros but in tier 2 cities as well with companies showing marked preference for leveraging flexi spaces with well-connected infrastructure, advanced technologies and smarter functioning to reduce their costs and improve productivity.
According to the latest CII-ANAROCK report, “Workplaces of the Future”, currently approximately 35 million sq ft of flexible office stock is available across the country. Of this, around 71 percent or 25 million sq ft is owned by large operators. But new players too have major future expansion plans. For instance, co-working firm Smartworks is planning an approximately 20 million sq ft co-working space comprising approximately 2.5 lakh seats over the next three to four years.
RETURN OF RETAIL
Customers are back to physical shopping destinations. According to a CBRE report, retail leasing activity touched 0.6 million sq ft in Q3 2021 across Grade A malls and high streets, and also witnessed a quarter on quarter growth of nearly 165 percent. Faced with the challenges posed by e-commerce, retail is all set to get into experiential mode with high streets, malls, hypermarkets coming up with new concepts to provide an
engaging experience to visitors who can unwind, relax, and entertain themselves, apart from shopping.
ADOPTING DIGITALISATION AND INNOVATION
With the beginning of a new era of online home buying and selling, real estate companies have enhanced their technology factor and changed their offerings as per the new standards. They are investing in technology and digital channels to reach out to consumers in the country and abroad in a more efficient way.
Enhancements in technology are going to make property sale and purchase a seamless, hassle-free and transparent affair, making investment in Indian real estate a value proposition for NRIs.
EASE IN INVESTMENT NORMS
Of the top 20 investment destinations globally, India continues to attract high levels of Foreign Direct Investment (FDI). The government has recently allowed 100 percent FDI through the automatic route in construction-development projects — townships, residential and commercial
buildings, roads, bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, and city- and regional-level infrastructure. Thus, FDI has emerged as an important growth driver for real estate projects, which have succeeded in attracting increased remittances from NRI investors, especially in the residential market.
Luxury homes in global cities such as Mumbai, Bengaluru and Chennai are a preferred choice of these investors. Anarock’s consumer survey shows a clear rise in the preference for properties priced over Rs 90 lakh. During the first wave, 27 percent of respondents preferred properties
priced over Rs 90 lakh, which increased to 38 percent during the second wave. Now that we are in the midst of the third wave, will the security and reassurance provided by property bring more investors to the country’s real estate market? All in all, experts predict an optimistic year ahead for the real estate industry.
