The Year 2022 started on a positive note having emerged triumphant from the pandemic and building on the high sentiments of Indians towards investing in real estate for self-use as well as an investment asset class. A spoke in the wheel of global economic recovery came in the form of Russian- Ukraine war that created geopolitical risks and volatility in the global markets, impacting Indian economy as well. The resultant high inflation and interest rates due to the RBI consecutive repo rate hikes did sober down the buying sentiments, but in real estate the impact remained minimal.
While many western countries experienced economic hardships in 2022 with speculations of recession, India has managed to keep the recession at bay. The supply chain disruptions and labour shortage issues came back to normalcy in 2022, which was a great relief to the realty sector, though rising costs for both the construction materials and labour have led to increase of property prices across the country.
Year 2022 also saw the wholehearted adoption of hybrid working as organizations – occupiers and developers, started aligning their commercial real estate portfolios to the new format of working.
The retail and hospitality were the sectors that saw the greatest rebound this year as people starved of socializing and traveling took to malls and holidaying with a fervour. The gainer of this sentiment was the second homes real estate in city outskirts and getaway destinations. UAE Based Lulu Group announced launching of 12 malls across India in next 3 years and Swiss retailer IKEA opened its first large format store in India in 2022 followed by two more stores and more ambitious expansion plans in the pipeline for the country.
Residential real estate saw some new trends emerging. For the luxury housing, this was one of the best years. Premium residential values in Mumbai, Bengaluru, Delhi, Gurugram and NOIDA witnessed considerable growth throughout 2022. In contrast, affordable housing had a lean time, with more buyers in this segment going into wait-and-watch mode on account of rise in inflation and property prices. The year also saw a steep rise in NRI investments in Indian real estate across asset classes due to growing Rupee- Dollar imbalance.
ESG emerged as one of the major shifts in the Indian real estate with investors and occupiers favouring ESG and green certified buildings. These requirements instigated much innovation in the design, development, and construction of new buildings as well as existing stock during the year.
Year 2022 saw the continued emphasis on infrastructure development from Central as well as the State governments. The tier 2 cities emerged as the winners with growing connectivity boosted by infra development from roads, highways, airports and metros. In terms of investments, this year too office sector continued to remain the favoured asset class constituting 45% of the total PE investments during the year followed by warehousing, residential and retail.
Asset classes such as life sciences, data centres, and industrial attracted consistent interest and investment inflows, though foreign investors are cautiously observing the intensifying inflationary pressures on the nascent economic recovery across the world.
The biggest concern during the year for the real estate was the regulatory uncertainties. Off and on construction ban in Delhi NCR has severely impacted the delivery timelines of under construction projects. Similarly, unwarranted PILs during the year against real estate developers were a major cause of concern. On an upside Karnataka government reduced the guidance value of immovable properties across the state by 10 per cent for three months starting January 2022 to give a boost to the economy and very recently the West Bengal government announced reduction in stamp duty by 2% and 10% in circle rates till March 2023.
