WINDS OF CHANGE: YOUNG DYNAMICS IN INDIAN REALTY
While, residential real estate market continues to remain resilient and commercial realty gaining lost ground, the alternative asset classes are also making their impression on investors and buyers. Talking about the evolving trends, Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd Tata Housing Development Company Ltd. stated, “Despite concerns of a US recession, India's real estate market maintains strong investor confidence as seen in office space occupancy rates of 60% and over 30 million square feet of net absorption expected by year-end. Major institutions like DLF and Tata own considerable office spaces, and recent hiring activities suggest a potential full recovery in the next financial year.” Agreeing to the observation, Amit Grover, Executive Director Office Business DLF Ltd. added, “India is experiencing economic growth through adaptability, a rising middle class, government strategies, digital transformations, and a strong start up ecosystem. The country is focusing on intellectual property and research. The commercial real estate remains resilient due to flexible hybrid work models despite COVID-19 challenges. The employee base has grown due to the inclusion of more women workforce and tier-two workers, leading to workplace expansion. In SEZs, seat counts remain stable while employee numbers increase. Increased office space demand and seat counts are expected as businesses encourage employee returns, especially in organizations with significant growth over the past three years.” Concurring to the statements, Gaurav Karnik, Partner & National Leader Real Estate EY, said, “The SEZ is indeed a hot topic today, given the limitations and proposed changes. In terms of office space leasing, we are also seeing a distinctions between Indian IT companies and foreign ones, regarding return to work employee’s percentages.” TAPPING SEZ POTENTIAL Sanjay Dutt shared his views on the disparities affecting SEZs and the potential amendments to the SEZ Act that could enhance occupancy rates while diminishing vacancies, articulated, “Western multinationals fear talent loss and lag behind Indian firms in returning to offices, impacting SEZs with high vacancies and reduced revenue. Government actions, like allowing domestic tariff businesses in SEZs, could aid recovery. Adopting flexible policies, like shorter workweeks, within 6-12 months may realign corporations and bolster commercial real estate markets. For example, a major lease in Chennai's IT Park was secured due to asset quality and location, despite bureaucratic challenges. The real estate sector anticipates over 40 million sq ft absorption in the coming year, bringing optimism for developers and investors." Sharing his view on the same, Amit Grover added, “India attracts global IT companies due to its large tech talent pool, contributing 20- 22% of the global supply. Special Economic Zones (SEZs) offer size and ecosystem benefits but are underrated. Enhancing SEZs involves educating businesses about their advantages and allowing flexibility through floor-wise denotification, letting organizations choose between tax breaks with regulations or a flexible environment without incentives.” Gaurav Karnik added, “SEZ facilities need to encourage diverse group collaboration and public access. The government will have to addresses SEZ issues, as co-working spaces gain popularity for their flexibility, services, and hub-and-spoke potential. Co-working providers benefit tier two cities but may lose market share when major companies establish long-term developer agreements." FRACTIONAL OWNERSHIP & REITS FUTURE The shared ownership models such as Fractional ownership and REITs is a growing trend, with platforms offering this service experiencing impressive growth in recent years. The experts discussed the implications of fractional ownership, its role in the real estate industry, as well as the current four REITs and the potential for more to join the market. As per Gaurav Karnik “With the introduction of co-ownership models like REITs and Fractional ownership, anyone can purchase a part of CRE and earn handsome monthly rental income. SEBI is now working to regulate and streamline these platforms which will further encourage even smaller-scale REITs entering the market.” Sanjay Dutt expressed, Fractional ownership streamlines asset management and title complexities. Various capitals back these investments, though private investors prefer REITs. Indian yields may drop to 5-7% as inflation stays controlled, but the timeframe is unclear However, Fractional ownership has given an opportunity to small retail investors of earning higher returns through investing in commercial real estate, who had till now been limited to low-return residential investment segment.” In regards to the medium and long-term prospects of REITs, Amit Grover stated, “The US commercial real estate faces challenges in contrast to India's thriving market focusing on modern infrastructure, eco-friendliness, and employee well-being. Grade B and C properties are more at risk due to specialized workspaces in demand. Large developers and REITs are crucial for long-term growth and REITs are expected to recover as stability returns, providing lasting opportunities for retail investors." THE RESIDENTIAL REAL ESTATE SCOPE The real estate sector in past few years has been disrupted by various technological advancements in the industry that has boosted its growth among homebuyers as well as investors. Speaking about the residential market disruptions, Gaurav Karnik said, “The last couple of years have been the best and future is looking upbeat in my view. Residential has been in a golden run for the last 10 or more years, due to millennial now preferring to own a property and Proptech enhancing the transparency and transaction convenience for the buyers. Real estate firms mostly family-owned, should adopt professionalism and technology as new generations take control. State governments too need to establish unified development controls for institutionalization.” Addressing the question of whether the demand for residential properties will be driven by affordable housing, mid-segment or luxury properties, Sanjay Dutt stated, “Affordable housing faces challenges in major cities due to the dominance of premium and mid-range homes leading to high property prices. Tier one cities experience residential market growth with speculation risks. Developers risk costly inventory issues and project value loss. A strong economy, government investments, and expansion of tier 2 and tier 3 cities driving job opportunities will support the residential sector. However, external factors or supply-demand imbalances may cause price stagnation or decline”. Amit Grover shared his view, “Real estate firms must embrace technology for competitiveness. Utilizing standard software enhances efficiency in the processes. The start-ups are driving innovation in Proptech that are bringing more efficacy for the residential segment as well as CRE. The focus lies on tenant management, lease abstraction, and data analysis in commercial real estate. Capital markets ought to evaluate an organization's technological potential for industry advancement.” “Adopting technology will create adaptable organizations, allowing developers to excel in various sectors. The world is moving towards a collaborative era, necessitating increased cooperation among organizations, especially in real estate. By establishing highly collaborative organizations and utilizing technology, we can drive product and operational innovation.” Gaurav Karnik “To succeed in real estate, research thoroughly and ensure your passion aligns with the profession. Cultivate a mindset of self-improvement, learning, and openness to feedback. Seek mentorship for growth and avoid impulsive career shifts for short-term gains. Focus on loyalty, communication, and self-development within your organization. Utilize online courses and professional organizations to enhance education and skillset”. Amit Grover “Tata Realty is utilizing technology from drone surveys to 3D printing and robotics. AI aids in lead generation, automates post-construction, customer call center and enhances property management. Tata Realty Infrastructure employs Microsoft Azure for cloud-based enterprise management. Moreover, sustainable construction and energy efficiency are prioritized through advanced materials and technology integration”. Sanjay Dutt
Tags : winds change dynamics Indian Realty Sanjay Dutt MD & CEO Tata Realty & Infrastructure Ltd Amit Grover Executive Director Office Business DLF Ltd Gaurav Karnik Partner & National Leader Real Estate EY flexible hybrid work models SEZ co-working corporations revenue vacancies