How Indian realty evolved in 2019 and moving forward

Meanwhile, the real estate sector has shown remarkable resilience despite the bearish phase of the economy. Below is a lowdown of how the real estate story unfolded in the year 2019:

Retail demand continued to remain strong in 2019 and witnessed a healthy mix across brand categories of F&B operators, mid-range and value fashion along with entertainment-based retailers. According to Anshuman Magazine, Chairman & CEO – India, South East Asia, Middle East & Africa at CBRE, department store retailers remained active in southern cities such as Chennai, Bengaluru and Hyderabad, whereas, fine dining, specialty restaurants and sporting goods’ brands increased their footprint in Delhi-NCR and Mumbai. “Supply addition witnessed a dip during 2019 in comparison to 2018. However, it is expected to pick up as nearly 4-5 million sq ft of investment grade mall developments are expected to become operational by the end of 2020. The sector saw investments worth $196 million during the period, which is comparable to almost $215 million investments in entire 2018,” he tells us.

Leasing activity for the office segment increased by more than 30% annually to cross 47 million sq ft during the first three quarters of 2019; to surpass its previous peak of 2018. Anshuman says, “The leasing activity stood at about 15.4 million sq f. during Q3 2019, rising by nearly 23% on an annual basis. Bengaluru, followed by Hyderabad, NCR and Mumbai, accounted for about 80% of the leasing during the first three quarters of 2019 (2019 YTD). About 43 million sq ft of new office supply was added in the first three quarters of 2019. Meanwhile, supply addition was up 80% in the first three quarters of 2019, as compared to the same period in 2018. The additions were led by the aforementioned cities.”

The expert if of the opinion that 2020 is expected to see a continuation of this growth story, with space take-up expected to further strengthen in the short term. “Tech is expected to continue shaping office demand even as occupiers adopt newer workplace strategies to realign their portfolios by trying to find the right mix of flexibility and collaborative/incubation spaces within their core workplaces along with adding external flexible options. We expect flexible space operators to continue to expand operations and target secondary markets in Tier I cities and major markets in Tier II and III cities,” says Anshuman.

Leasing activity increased by almost 31% compared to H1 2018, crossing 13 million sq ft in H1 2019. Third party logistics (3PL) players accounted for about 56% of the leasing activity, thereby driving space take-up during the first half of the year. Anshuman remarks that recent policy reforms and infrastructure initiatives have boosted this sector, which is likely to attract significant investments in the future. According to the CBRE APAC Investor Intentions Survey 2019, India was among the top 5 investment destinations in APAC, with industrial and logistics being one of the top targeted segments. Anshuman says, “In 2020, we expect the overall pipeline for the sector to reach 60 million sq ft, with leading players accounting for at least 22 million sq ft of this supply. We expect logistics leasing activity to strengthen, owing to consolidation / expansion by occupiers. We also expect the fast growing food services/quick service restaurant (QSR) industry to boost the demand for cold storage warehouses in the coming years. Supply chain integration is likely to remain tech-enhanced, with increasing demand for 3PL and even 4PL services in certain instances.”

On an annual basis, residential supply increased by 24% in 9M 2019, compared with the same period previous year. Sales activity too improved by 26% during the same period. The growth can be attributed to the sustained efforts of the central government to strengthen the sector, especially affordable housing. These include setting up an alternative investment fund worth INR 25,000 crore for stalled housing projects, enhancing banks’ lending cap to registered NBFCs for on-lending by housing finance companies, etc. In addition to these steps, the government has launched several flagship schemes such as Smart Cities, Swachh Bharat, AMRUT and Housing for All – all aimed at long-term development of residential real estate. While the NBFC crisis and the resulting economic slowdown have slowed the recovery of the sector, affordable housing continues to drive the sector.

As the Indian economy transitions and its workforce expands, it will offer vast development and investment opportunities for the real estate sector. The growth of cities is going to further influence the country’s-built environment, while technology, demographics and environmental issues will become its new value drivers. Anshuman points out that already, workplaces are becoming more modern and open, in keeping with the aspirations of the millennial.