Even in the face of the pandemic that went well into 2022, while there was a slowdown of real estate across the globe, the Indian real estate market showed an amazing resilience, and started its recovery phase as early as the last quarter of 2021. In the first quarter of 2022 itself the Indian real estate sector has shown remarkable growth. So, what are the major trends that are contributing to this growing market? Let us explore.
Apart from being a top choice for investors, the market is expected to grow to a market value of USD 1 trillion, from USD 200 billion in 2021, while contributing 13% of India’s GDP by 2030, as per Financial Express. Out of real estate, commercial real estate has always been considered a rewarding investment because it offers great return on investment and additional income opportunities. As per reports, it is expected that the Indian real estate market will be growing at a rate of 13% CAGR during the forecast period of 2022 to 2027.
While the pandemic was expected to throw a wrench in the whole system, interestingly, growth of businesses and the proliferation of ecommerce boosted the real estate market, aided by digitalization, policy support, low interest rates, and growing consumer confidence. While the residential real estate market has a demand and supply that varies with the sentiments of the people, the commercial real estate market is rather insulated from the rest of the market and gets to decide its own pace based on the state of the economy. Let us know which types of assets grew the best and why.
Demand for Grade A office spaces will be rising as sectors of IT, manufacturing, BFSI, startups and even boutique firms are looking at flexibility, comfort, and convenience in their search for office spaces. Companies are also looking to set up remote and satellite offices to cater to the needs of the workforce as more and more people are making it back to the office schedule. Decision makers are investing in office spaces to ensure smooth business operations, scalability, and high returns in the future.
Retail and Hospitality
People returning to offices is just the start. With increased footfall in offices, it is only normal that shopping and dining at physical outlets will gain momentum. That means the growth of physical retail outlets. Going a step further, availability of items and services under one large roof is going to increase demand for high end malls as well. Not everyone decides to stick to the small radius of their office or home, travel is going to pick up pace, with increased demand for hospitality spaces like hotels, inns, and the like.
Warehousing and Industrial Spaces
The single most important growth factor in the economy was the rise of ecommerce and manufacturing. Now that the importance of them has been registered, companies are keen on increasing the quality of services in logistics and supply chain, leading to increased demand in warehousing and storage. The Make in India initiative has provided a much needed impetus to manufacturing in India and since then, demand for well connected industrial spaces has also picked up in regions of Chennai, Bangalore, and Mumbai. Some of these spaces come with warehousing capabilities as well.
Technology and CRE
Use of technology has made access to quality commercial real estate (CRE) even better. Companies are using AI, virtual reality, data analytics, and the like to provide clients with virtual tours, prospective growth figures, future projections on returns while making transactions, communications and customer relationship management even more seamless. People can look up their preferred assets online and get access to much more information now than they could possibly have a decade earlier.
Sustainability in focus
Grade A spaces are in demand because they offer more flexibility for customization and improvement when compared to older spaces. In addition to that, newer spaces are focused on eco-friendly development to tackle pollution, address the looming issue of climate change and make use of renewable sources of energy, while trying to lessen any unnecessary burden on the environment. Real estate developers have started giving more importance to certifications like LEED, IGBC, GRIHA& BEE in construction to reduce carbon footprints. Net zero portfolios have started picking up interest globally as well.
Looking at all these new developments in the commercial real estate market, it is safe to presume that demand and supply will continue to be in a positive spree, while investors can be sure that their investments in CRE will keep generating fruitful returns for the long run. Haven’t you started investing in commercial real estate yet? Well, then Strata offers an easy way to invest in some of the best commercial assets in India via fractional ownership.