The Indian real estate sector exhibited strong resilience and rebounded from global economic headwinds, unfolded due to the pandemic shocks. The residential real estate sector witnessed a surge in the real demand for homes from the end users, resulting in record high actual sales on the grounds.
According to Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd, “The Global Economic sentiments and market volatility haven’t affected the Indian real estate market all that much yet. The pandemic stoked the aspiration among NRIs to own a home back in India. It acted as a pecuniary security and made them feel connected to the country. Another reason that encouraged lakhs of Indians based in other nations to own a home in India was the depreciating value of the Indian rupee. Since 2018 the rupee has been on a falling trend. The pandemic and geopolitical tension in a way had a positive impact on the Indian residential sector.”
Dr Niranjan Hiranandani - MD- Hiranandani Group said, “The demand rally was powered by underpinned homeownership sentiment, low interest regime prior to subsequent hikes, accommodative stance of the developers due to deal sweeteners and property price began to rise. The choice of inventory available and innovative flexi financing schemes doled out by Banks & FIIs augured well for buyers in the primary as well as secondary property market. The NRIs & HNIs were skewed towards luxury spacious homes to capitalize on currency depreciation advantage and also invest in housing asset as a safe net amidst geo-political crisis. Investors sought rescue by reorienting their investment back into real estate assets amidst volatility in capital markets. The market consolidation trend led to increased market share of branded and organized players in the sector. The sales momentum remained buoyant despite sporadic economic contamination in FY 22.”
Harsh Lambah, Country Manager India, Vice President Sales – South Asia, IWG expressed, “Over the last two years, enterprises have steadily shifted towards hybrid working, to align with shifting workforce preferences. As a result, ‘hybrid-working’ is now a solution for millions, as they divide their working hours between their company headquarters, a local flexible workspace, and their home – boosting corporate productivity while also creating a more sustainable way of working for both people and the planet. During this time, many employees have grown to prefer and opt for hybrid work practices, which has resulted in increased work life balance and a happier and healthier work force. This led to greater demand for flex spaces in 2022, with many corporates, enterprises as well as MSMEs seeking an ideal workplace solution that would support their growth plans."
Thirumal Govindraj, -Senior MD & Member - Executive Board, RMZ Corp shared, “The commercial real estate sector performed better than expected in 2022, particularly in the first two quarters. During this time, we witnessed nearly 70-80 per cent absorption. However, in the third quarter, there was a slight slowdown. This was due to many businesses deferring decision-making to the following year.”
Pradeep Aggarwal, Founder & Chairman-Signature Global Group, Chairman-ASSOCHAM, National Council on Real Estate & Urban Development stated, “The year 2022 can be best summarised as a year that saw the Indian real estate industry emerge more resilient in the wake of global disruptions, and inspired confidence in both Indian and international investors. Real estate sector being a major contributor to India’s GDP needs more focus from the government. There is no doubt that real estate, particularly the residential segment, has bounced back strongly post pandemic. Driven mainly by pent-up demand, stable price and historical low interest rates on home loans, sales in the top 8 cities crossed pre-COVID levels in the year 2022. Furthermore, with government relaxing and widening the scope of public policies, 2022 saw significant progress in ensuring stalled infrastructure development projects reaching closer to completion.”
Rajesh Jaggi, Vice Chairman – Real Estate, Everstone Group speaking about the year 2022 mentioned, “It has been a good year overall for the logistics sector, backed by new initiatives and policies from the government such as the National Logistics Policy (NLP), which was introduced with the primary aim of making the country’s logistics ecosystem more efficient. We are confident that the NLP, along with the PM Gati Shakti master plan and numerous state level initiatives will help in establishing a robust logistics network in India. In addition, the multilateral and bilateral partnerships signed by India will increase market access across the world for India-specific goods.
Through 2022, we saw these government initiatives significantly enhance the ease of doing business and lead to the development of several sunrise sectors in India like renewables, Electric transport, and more. Alongside this the global ‘China plus one’ manufacturing strategy and PLI initiatives are transforming India into a Global manufacturing hub across key sectors. In line with the PM’s vision of ‘Make in India, Make for world’!
Developers are rapidly diversifying their portfolios by building in-city warehouses, adding dark storage facilities, and providing built-to-suit models in high growth Tier II and Tier III markets to support last-mile deliveries. The past year also brought significant growth for us at IndoSpace and we have an existing portfolio of 46 parks and 51 million square feet across pan India and are strengthening our offerings across major markets.”
THE HITS AND MISSES OF 2022
Dr Niranjan Hiranandani said, "The eal estate industry witnessed exciting developments in the past year. The kickstart of historic Dharavi redevelopment was one of the biggest hits in the year with an investment of Rs. 20,000 crores in an attempt to create more livable and sustainable communities for 58,000 families. The SWAMIH fund came as a relief for the industry with a fund of Rs. 15,000 crores, handing over 20,000 houses in a single year. The year also clocked in robust sales numbers in the luxury and ultra-luxury housing market, breaking previous records indicative of the growing wealth in India. The housing market witnessed a record sales number of 3.6 lakhs units being sold in the top 8 cities despite 5 consecutive rate hikes- a strong indicator of multi-year bull run cycle for the residential real estate market. The fiscal stimulus from the Government would have further bolstered the consumption demand and accelerated the growth pace. Input tax credit in GST is a long awaited relief to the industry where cost of borrowings has soared up on the back of monetary tightening."
Harsh Lambah stated, "The hit for 2022 was that, while uncertainty prevailed in the majority of the world, India emerged from the worst of the pandemic and economic activity picked up steam. A miss that is being addressed is a fantastic opportunity to provide greater availability of flex spaces in tier 2 and tier 3 cities. IWG is currently present in 7 tier 2 cities and the plan for 2023 and beyond is to expand our network through our franchise and partnership strategy in these as well as new tier 2 and tier 3 cities with our existing as well as bring in new brands."
Pradeep Aggarwal expressed, "The greatest hits of last year were the government subsidies on registration stamp duty and commendable incentives like affordable housing loans spurred by an expansionary RBI repo rate. It was heartening to see the fiscal policy and monetary policy work in tandem to bolster the Indian real estate industry and revitalise the Indian economy after the slowdowns witnessed during the pandemic. In terms of misses, the GST rates on vital construction material needs significant restructuring. Given that cost of construction has gone up significantly in the last couple of years, in order to support real estate, especially affordable housing segment where margins are thin, the government should think of rationalizing GST rates. It should be brought down to single digits on construction materials like those that steel, cement, tiles and so on. The fact that the current slabs and deductions limits have not been changed for many years, it is high time that the government should revisit these limits and make appropriate amendments.”
Sanjay Dutt was of the view, “The value of the real estate sector is expected to reach $1 trillion by 2030, up from $200 billion in 2021, and at that point, it would have contributed 13% of India's GDP. In one year, the Indian real estate market saw transactions involving 1,700 acres of land in the top seven cities. In this sector, foreign investments totalled $10.3 billion from 2017 to 21. All of these signs are positive and should be taken as such. Also, with the Energy Conservation (Amendment) Bill passed recently, which places a core focus on sustainable development, the overall quality of residential and commercial projects will be keeping climate change in mind. This, however, could cause an upward migration of the prices of real estate. The housing segment, which drives economic growth and underpins the whole real estate industry, is predicted to have one of its most exceptional and probably best years ever.”
Rajesh Jaggi shared that the logistics and infrastructure sector witnessed more hits than misses in 2022. “The industry was able to rise to new heights despite the massive changes and challenges in the aftermath of the pandemic. While the pent-up demand over the past two years was a key element, the manufacturing sector also helped the logistics industry achieve considerable growth, thanks to the mutual demand and supply.”
“Overall, we believe that 40-45 million sqft absorption for the year is a positive sign for commercial real estate in India. In addition to this, we observed that businesses are looking for flexibility within their office spaces to quickly scale up and down as the situation requires. We expect the emphasis to shift to optimising office spaces, “added Thirumal Govindraj.
THE NEW SHIFTS IN REAL ESTATE
Dr Niranjan Hiranandani stated, “The transformation genesized hybrid way of living with lifestyle oriented towards holistic way of living. Consumers expect a better integration of space and service in the real estate industry for sublime customer experience. The trend of digitalization and automation technology has penetrated into every aspect of business and consumer purchase cycle. Demand for sustainable development is gaining ground among investors as well as homebuyers. An impetus to infrastructure development will augment last mile connectivity to the new economic nodes of development that will boost real estate growth. Demand for commercial office spaces has rebounded as companies resume back to office status with growth and expansion plans in place. Growth of alternative asset classes like Industrial and Logistics, Data Centres, Flex spaces, student housing will see an uptick, nudging demand for rental housing subsequently."
Rajesh Jaggi said that to adhere to the rapidly growing consumption demands in India, investors will adapt to newer objectives and different attitudes. “As per a sector report, India will need to meet 223 million square feet of Grade A warehousing demand with an investment of around $3.8 bn over the next three years. India is rapidly on the path to becoming the most preferred manufacturing hub worldwide. Manufacturers need ready, cost-effective, and world-class industrial facilities, which opens opportunities for the industrial warehousing sector to play an integral role and provide plug-and-play industrial facilities.
This rapid growth will further encourage digitization of trade, outsourcing to professional 3PLs and consolidation of different distribution channels. This will in turn continue to generate demand for Institutional Grade A warehousing across Tier 1, 2 & 3 geographies. This is seen in the growing share of Grade A infrastructure among India’s Warehousing footprint of ~330-340mn sq. ft. These factors will only act to further strengthen this position.”
Harsh Lambah looking at trends for 2023 said. “It’s clear that yet more change is on the way, as many working lives are impacted by innovations and new thinking in areas such as sustainability, technology, recruitment, and productivity. Productivity is an ever increasing a priority for businesses, especially in uncertain economic times. Co-working operators will invest in a variety of technologies, user interfaces design and devices, improved security access, and much more. Similarly, they will invest in advanced work management software to improve customer comfort and safety. Surveys increasingly show that people want to work near to where they live.
A recent IWG poll of Gen Z workers (who are set to make up more than a quarter of the global workforce by 2025) found that 85% want to be able to use an office close to home. In a separate IWG survey, 77% of workers said a place to work closer to home was a must- have for their next job move. As a result, there will be a clearer move towards more flex options, the emergence of tier 2 and tier 3 cities as major coworking hubs and increasing investments in technology to support customer experience and needs.”
Pradeep Aggarwal stated, “With interest rates on home loans now moving upwards, a lot depends on the upcoming Union Budget 2023 to support and sustain the housing demand in the year 2023 and beyond. As the direct and indirect tax collections are witnessing significant growth and the fiscal deficit is expected to come down. This should promulgate a paradigm shift in the real estate going forward. While the problems associated with unsold inventories has reduced significantly in the last year, the problem related to stalled projects was still a cause of concern. A major pivot by the government has been the reallocation of more funds under the stress fund SWAMIH. Additionally, subsidies provided under the Credit Linked Subsidy Scheme (CLSS) has been a big saving and motivation, especially for low-ticket housing demand. This has led to a major revitalization of the "Housing for All" mission.”
Sanjay Dutt added, “The Indian real estate industry has met investor expectations and has persevered through recent market ups and downs. Had it not been for the recession, the residential sector could have fared much better. Yet, India remains to be among the few countries with the highest GDP growth.”
EXPECTATIONS FOR THE SECTOR
Rajesh Jaggi expressed his expectation of further expansion 3PL and e-commerce sector to encourage a higher demand for grade A warehousing facilities. "Additionally foreign investments in the sector are likely to surpass last year’s inflow. For developers, expansion in Tier II and Tier III markets will continue to be a core focus given the fact that the main applicants for warehousing, including manufacturing, retail, healthcare, construction, and technology, are set to grow enormously in the coming years. In fact, recent trends suggests that India’s real estate market size is expected to touch US$ 1 trillion by 2030, which I truly wish for the industry to achieve at the earliest.”
Dr Niranjan Hiranandani shared, “Real Estate industry pegs to grant an infrastructure status that enables the developers to avail long term cheap credit amid inflationary pressure. Tax rationalization and a single window approval system will foster cumulative growth of the labor-intensive real estate sector. Technology integration, Upskilling the workforce and fluid business strategies that can encompass rapid global evolution to stay ahead of the curve will be crucial for industry players. Timely policy restructuring and law amendments to accommodate trends shaping up industry developments will help to keep the sector on an upward growth curve.”
Harsh Lambah said, “My wish is to offer more flex solutions to all segments of customers through more locations, Brands as well as expanding our national network to more tier 2 and tier 3 cities. My hope and plan for IWG is to contribute towards more environmental, social and governmental sustainability to make our planet a better place and bring positive change in our professional and personal lives. Adopting the hybrid model enables companies to make progress under six of the UN’s 17 sustainable development goals.”
As per Sanjay Dutt, “With the increase in job growth and a rebound from the current stock market decline, the Indian economy is likely to expand by 6.9% in 2023. Many analysts believe that the self-sustaining nature of the sector coupled with the growth potential of the Indian economy, optimistic expectations, and upward momentum will persist in the future year.”
Pradeep Aggarwal stated, “At the top of the wish list has been the enhancement of the income tax deduction limit against home loans interest payment. With interest rates going up and inflation affecting the finances of taxpayers, we hope the government will certainly look into this long pending demand and raise the deduction limit. Additionally, the entire interest should be allowed as a deduction, especially in the affordable housing segment. Most home buyers have is a separate section for deduction against home loan principal repayment. Currently, section 80C is cluttered with too many avenues, which qualify for deductions under the same section. Very few people are left with scope to claim deductions for home loan principal repayment under section 80C. So, a separate deduction against home loan principal repayment can be a game changer for the real estate sector.”
“There has been an increase in demand for office spaces ranging from 50K to 100K sqft. As we begin the year 2023, we anticipate that things will take off in the mid-first quarter. Many businesses are looking at India and setting up offices. If everything turns out well and there are no surprises in the form of new lockdowns or major COVID-related issues, gross absorption of 50-55 million square feet could be expected in 2023,” added Thirumal Govindraj.
“A MAJOR REASON THAT ENCOURAGED LAKHS OF INDIANS BASED IN OTHER NATIONS TO OWN A HOME IN INDIA WAS THE DEPRECIATING VALUE OF THE INDIAN RUPEE. SINCE 2018 THE RUPEE HAS BEEN ON A FALLING TREND.” SANJAY DUTT
“THE CHOICE OF INVENTORY AVAILABLE AND INNOVATIVE FLEXI FINANCING SCHEMES DOLED OUT BY BANKS & FIIS AUGURED WELL FOR BUYERS IN THE PRIMARY AS WELL AS SECONDARY PROPERTY MARKET.” DR NIRANJAN HIRANANDANI
“OVER THE LAST TWO YEARS, ENTERPRISES HAVE STEADILY SHIFTED TOWARDS HYBRID WORKING, TO ALIGN WITH SHIFTING WORKFORCE PREFERENCES. AS A RESULT, ‘HYBRID-WORKING’ IS NOW A SOLUTION FOR MILLIONS.” HARSH LAMBAH
“THE COMMERCIAL REAL ESTATE SECTOR PERFORMED BETTER THAN EXPECTED IN 2022, PARTICULARLY IN THE FIRST TWO QUARTERS. DURING THIS TIME, WE WITNESSED NEARLY 70-80 PER CENT ABSORPTION.” THIRUMAL GOVINDRAJ
“REAL ESTATE SECTOR BEING A MAJOR CONTRIBUTOR TO INDIA’S GDP NEEDS MORE FOCUS FROM THE GOVERNMENT. THERE IS NO DOUBT THAT REAL ESTATE, PARTICULARLY THE RESIDENTIAL SEGMENT, HAS BOUNCED BACK STRONGLY POST PANDEMIC.” PRADEEP AGGARWAL
“THE PAST YEAR BROUGHT SIGNIFICANT GROWTH FOR WAREHOUSING SEGMENT AND WE ARE STRENGTHENING OUR OFFERINGS ACROSS MAJOR MARKETS.” RAJESH JAGGI