An Overview of Commercial & Residential Real Estate Markets in India
It was a boom for commercial real estate in 2019 and the same is likely to continue in 2nd half of 2020. Commercial real estate is expected to witness the gross absorption of 54.3 million sqft in India’s top seven cities including Delhi NCR, Bangalore & Hyderabad. While the developers are continuing to be optimistic in commercial real estate, the case is totally different when it comes to the residential real estate market. The supply in commercial or office real estate is increasing so is the absorption rate. Occupancy in top grade office buildings have increased so has the rent in many markets across the country. There are several reasons that one can sight, commercial or office market is characterized not only on the basis of transparency but also on timely delivery in most of the cases. Rentals are rising because of the limited availability of high quality commercial or office spaces in the market while companies are pre-committing to developers for larger spaces that have started work now.
The commercial real estate in India will also be kept afloat because India became $2.7 trillion economy in 2019 and now wishes to touch $5 Trillion by 2024-2025. The way stores in India are changing particularly after GST was enforced in 2017, they are more tax efficient now. Many companies which deal in consumer durables, manufacturing and fast moving consumer goods are consolidating their smaller warehouses across various locations in different states into few strategic locations and larger ones considering India is now a single tax country. Commercial and logistic real estate will see a massive investment in technology enabled office spaces and warehouses and manual offices will be replaced by high tech offices. Concrete and low-quality steel go-downs will also be replaced by high quality steel structures which are only assembled on location but pre-engineered in factories. From managing single company offices tech companies are now shifting to multi-client, multi-product models which in turn will increase the demand for commercial or office real estate in the country.
At the time when commercial real estate is on boom, 2019 didn’t have very encouraging news for the residential segment. Some of the reasons that are cited by the property consultant Anarock are lower than expected buyer sentiments, liquidity crises and faltering GDP growth. The growth in the residential market will depend on the swift implementation of previously announced on-ground measures which includes stress fund of Rs. 25000 crores. If these measures are not taken on time, it can further derail the segment and will have a negative impact on the residential real estate market. But if these measures are taken on time it will have a positive impact on residential real estate in 2020. The major turn in residential real estate market will be seen in 2nd half of 2020, and the financially strong developers will stay ahead in the game. The new trend to be watched in 2020 would be rental housing. Metropolitan cities such as Delhi NCR which consists of world class cities such as Gurgaon and its expanding subsidiaries are becoming popular destinations for renting and thus can see a huge growth in the rental housing segment. This is because of urbanization taking place at a very high volumes where people are moving from far-off places and other states to these metropolitan areas in search of jobs at all levels and for the facilities that these cities have to offer. This in turn has increased the demand for rental housing.