A closer look at the real estate market: a past year and the promises that the new year brings

The pandemic has prompted consumers to reconsider the importance of owning a home, which in turn has increased demand for residential real estate.

We entered 2021 with an economy riddled with a pandemic. The real estate industry was quick to set the stage for a quick turnaround, in the way it did business. Make the recovery faster than expected with a new phase of growth, innovation, technology and investment trends.

Real estate is a multidimensional industry with many facets. While some of its sectors experienced a boom during the pandemic, some are recovering from the downturn it has faced. Industrial real estate has been one of the most successful sectors of the commercial sector for several years, depending on demand and income. The pandemic has accelerated demand industrially, especially for warehouses, data centers and distribution centers. This trend has opened up new avenues for the growth of the sector in the years to come.

The year that was

A shift in consumer priorities – Interestingly, the past 20 months have seen drastic changes in consumer lifestyle preferences. The pandemic has prompted consumers to reconsider the importance of owning a home, which in turn has increased demand for residential real estate. The importance of having extra space in the home has become a big trend in the age of physical distancing, working from home, and home schooling routines. The demand for housing with amenities and townships that allow homeowners to live more freely and lead healthier lives has also increased.

Tilt towards move-in projects – Last year, the demand for move-in units increased in almost all cities. It has become a favorite segment due to the shift in mindset of buyers, to seek safety and avoid the risks associated with properties under construction.
Increased demand in Tier 2 and 3 cities and outlying areas – The industry has seen an increase in demand for residential properties in Tier 2 and Tier 3 cities. This upward trajectory of demand has opened up some new routes of opportunity, so that these cities become the next destination for real estate. The desire for a better way of life, the culture of remote working and reverse migration have led to increased demand for housing in outlying areas. Additionally, it has created an opportunity for real estate players to explore and deliver superb home experiences to this untapped consumer demand and to enter new markets.

Government incentives have boosted the industry – Considering the potential for revival of the real estate sector, the government proposed progressive policies to give a boost to the industry. In order to stimulate the economy, the government has taken initiatives to reduce tax incentives, creating an enabling environment to encourage home buyers. Low interest rates on home loans have also invariably increased the affordability of homes.

Thinking about sales – The volume of sales in the residential sector from October 2020 to December 2020 doubled to reach 61,593 units, against 33,403 in the previous quarter, a sign of a healthy recovery, despite the challenges facing the industry. Home buyers have taken advantage of promoter incentives and low interest rates, leading to increased residential sales in seven cities nationwide, according to an industry report. After the second wave, sales for the fourth quarter of 2021 have recovered to> 90% of the volumes recorded in 2020 in the first seven cities.

Commercial real estate market – Flexible workspaces are in high demand because not only do they fit the ‘new normal’ perfectly, but also provide businesses with a way to reduce costs, increase productivity, improve the work experience and improve the work experience. ” offer more flexibility to employees. In 2022, the coworking segment should experience greater demand. As companies are now gradually reopening, they are considering staggered hours for their employees.

The wave of sectoral digitization – The sector has also experienced a wave of large-scale digitization. With the paradigm shift, real estate players have had to adapt to the new normal. From online site visits to online payment, developers use innovative technological tools and practices at different stages of business operations. Virtual procedures have been and will continue to be a game-changer for the industry during the pandemic, with players adding more layers to the overall marketing experience.

Future of the industry in 2022-23

The contribution of the real estate sector to the country’s GDP is expected to reach 10% by 2030, contributing around $ 1 trillion to the economy, according to an industry report. Let’s take a look at some of the key trends that will shape the future of the real estate industry. Here are 4 key elementary trends that we foresee in the years to come.

Data centers– Due to digitalization in the aftermath of the pandemic, the demand for data centers has increased. India’s transformation into a “digital economy” has increased demand for the sector. Major industry players are now building data centers to take advantage of early investments. As a result, data centers are emerging as an attractive real estate asset class with enormous potential. The demand for data centers in India has increased due to increasing demand from fintech, e-commerce, media, education and content companies. Political measures, a growing customer base, and increasing requirements for corporate data storage are all driving the growth of data centers in India.

Flexibility is the future of offices – The pandemic has reshaped office work models not only for employees but also for employers. Leading companies have moved their offices to coworking locations and continue to do so to optimize costs and achieve better employee engagement under current circumstances. Flexible working options have become the workspaces of choice for all businesses. Companies are fragmenting their offices between Tier 1 and Tier 2 cities, providing flexibility to employees.

The emergence of timeshare in commerce – Fractional ownership is where investors collectively put in small amounts of money to individually own a fraction of a high value property with the aim of achieving high returns over time. Online investment platforms pursue investors by offering fractional ownership with high returns. Unlike mutual funds and stocks, where clear regulations are in place, fractional ownership in commercial real estate is a relatively new concept targeting a wider pool of institutional investors, individual investors and fractional investors. . The concept has gained in popularity and is on the way to reducing the financial burden on the sole investor of the property.

Affordability is here to stay – In 2021, we saw the affordable segment as the main preference for buyers. More than half of the demand for housing in major markets has been driven by the affordable segment. From there, the coming year offered developers a chance to focus on optimizing costs, despite rising input prices, by deploying technology and bringing innovation to their offerings for keep the segment afloat in 2022 and meet consumer demands.

The rise of last mile delivery – The pandemic has accelerated the pace of the e-commerce industry to meet consumers’ needs for increased home shopping. Prompt fulfillment and rapid distribution of orders has become a priority of every online shopping experience. This led to a last mile delivery with city-specific local warehousing contact points. Driven by the rising wave of e-commerce, consumers looking for homes, the concept of these micro-warehouses has created a great demand in the market. In the years to come, micro-warehouses will become a common phenomenon, more and more actors will adopt it all over the country.

Conclusion

As mentioned above, projections and industry trends suggest that the future of Indian real estate not only looks bright, but is expected to rise through the ranks in the years to come. There are several dynamics that will continue to impact the multiple facades of the real estate industry, such as: prices, buyer behavior, demographic change, the cost of raw materials in general. Therefore, it can be said that affordable, self-contained properties with a consumer experience-centric approach are the future of real estate for at least the next 5-7 years.

(By Bijay Agarwal, MD, Sattva Group)

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