Despite global challenges, the Indian economy has shown remarkable resilience and even sharp growth segments of luxury estates, commercial properties and emerging asset classes like warehousing, industrial facilities and data centers.
Piyush Gupta, Managing Director-Capital Markets and Investment Services India, Colliers anticipates a substantial positive shift in India's real estate landscape. “Office spaces, last year experienced a gross absorption of 50 million square feet. This year, we are nearing 40 million square feet, showcasing a promising trend. Growth will concentrate on areas with comfort, connectivity, job opportunities, and a captive population. Infrastructure development plays a primary role in driving expansion across various asset classes and tiers of cities.”
Parvesh Sharma, Country Head India, Tishman Speyer Private Limited, added, “India's resilience in the global market is driven by a large talent pool serving GICs and GCCs, attracting tech giants such as Apple, GE, Microsoft and Morgan Stanley. Companies are optimistic about expanding in tier 2 cities due to the state government's efforts in providing infrastructure and incentives. Expansion typically starts with small offices and grows as demand increases. Employee relocation and comfort in hometowns contribute to the growth potential, especially in western and northern cities with suitable incentives. India's residential real estate market holds great potential due to urbanization and a 1.3 billion population. The growing demand for housing includes a shift in preference from 2BHK to 3BHK properties.”
Vinod Rohira MD & CEO-Commercial Real Estate, K Raheja Corp Group, concurred, “India's growing tech industry is transforming its commercial real estate, moving beyond call centers and BPO services. Bangalore, Hyderabad, and Pune are anticipated to fulfill the majority of commercial real estate demand due to the return of employee’s post-pandemic. This growth is fuelled by GCCs, GICs, and domestic demand. In the residential real estate sector, periods of up cycle and down cycle are a regular feature but, caution during high property sales period to avoid errors and misalignment between consumer demand and supply is crucial.”
MARKET DYNAMICS
Piyush Gupta added, In international business hubs developers and investors face challenges in expanding their portfolios due to the significant office space and housing stock inventories. In India, offices and housing segment are seeing steady growth, though excess supply in some cities may not be met by demand, leaving the future uncertain. From an investor's standpoint, the stable yield rates on office and warehousing assets, ranging from 50 to 100 basis points, have made it difficult to attract global capital to India. This challenge persists as investors from the US or Singapore assess capital allocation, given the current yields.”
Vinod Rohira said, “In the commercial real estate industry, rentals now make up 80-90% of the market, leading to a demand for Grade A+ properties and higher density ratios. Speculative capital focuses on experienced Grade A asset and despite demand uncertainties, Grade A properties have lower vacancies than Grade B and C properties. This highlights a notable opportunity in the commercial real estate sector.”
Parvesh Sharma stated, “The current Indian real estate market is favouring residential purposes. However, fluctuating land values may prompt investors to explore alternatives, such as data centers and market dynamics will influence shifts in land usage going forward. During good times, even Grade B and C office buildings become occupied. However, during challenging times, people prefer A and A+ grade properties. India is a unique real estate market. With projects taking 3-4 years to develop, so it's important to plan for future demand.”
EMERGING ASSET CLASSES INCLUDE HOSPITALITY, HEALTHCARE, EDUCATION AND MANUFACTURING. WAREHOUSING & LOGISTICS WILL ALIGN WITH THESE EXPANDING SECTORS FOR GROWTH -VINOD ROHIRA
GOVERNMENT'S PUSH FOR MANUFACTURING WILL BOOST REAL ESTATE DEMAND. EMPLOYEE RELOCATION & COMFORT IN HOMETOWNS CONTRIBUTES TO THE GROWTH POTENTIAL OF TIER-II CITIES- PARVESH SHARMA
RESIDENTIAL MARKET IS EXPERIENCING CONSOLIDATION, OFFERING DEVELOPERS OPPORTUNITIES TO CAPITALIZE ON DEMAND & COMPLETE PROJECTS. YET A CAUTIOUS APPROACH IS PREFERRED -PIYUSH GUPTA
