The Indian economy is showing signs of recovery after a tumultuous two years marred by the Covid-19 pandemic. The previous year has also been a roller coaster ride for Indian real estate. The market crashed during Lockdown 2.0, but it quickly recovered as demand picked up. Despite concerns about the Omicron crisis, the market in 2022 appears to be bullish, with demand accelerating across all categories. Knight Frank India, an international property consultant, said in a report that 2022 may prove to be a more stable year for the pandemic-hit sector, both commercial and residential. According to Knight Frank’s ‘Real Estate Outlook 2022,’ India’s real estate sector is expected to grow at a healthy rate in 2022. The real estate sector has also regained buyer and investor confidence and accelerated growth momentum through consistent performance and a quick recovery.
In 2022, the Indian real estate sector has seen a healthy rebound across various segments.
Residential Real Estate
In 2022, the residential segment gets expected to see a 5% increase in capital value. Many of the supply and demand-side factors that have gotten assessed over the last decade have begun to put upward pressure on house prices. Residential sales momentum get expected to continue in 2022, as prospective homebuyers’ preferences for larger homes, better amenities, and competitive pricing keep them eager to close deals. According to the Anarock report, new supply in the residential sector increased by 27 percent between January and September 2021, compared to 2020, and sales increased by 5 percent. The year 2021 has been challenging and eventful for the real estate industry. Despite the pandemic’s business disruptions, the sector experienced a strong rebound. The real estate sector quickly gained traction, aided by strong economic growth. The pandemic-infused trends, combined with low-interest rates and affordability, have expanded real estate growth in tier 2/3 cities. It will also lead to the expansion of the sector. Investors and shoppers get drawn to new asset classes such as hi-street and multipurpose commercial properties. Large-sized homes emerged as a preferred choice in residential township projects and will continue to drive real estate growth in the years ahead. The coming year will be a significant one for the real estate sector. It will get contributed by the massive demand, evolving trends, and new emerging markets. The housing sector was also quick to embrace digitalization and innovation. There was also a demand shift in which offerings with best-in-class amenities became the most desired choice of buyers.
Commercial Real Estate
According to the CBRE report, office leasing activity reached 13.5 million square feet in Q3 2021, growing at a rate of about 140 percent year on year, indicating healthy growth in commercial real estate. Experts in the industry weigh in on the growth pattern. The pandemic-induced changes have increased demand for flexible office space and hybrid models. It is not only in metro areas but also in tier 2 cities. With a thriving business ecosystem, companies’ expansion plans, and new and emerging trends, 2022 will see an increased demand for Grade A office space. The combination of commercial real estate, coworking spaces, and grade-A offices with well-connected infrastructure is gaining traction. The remarkable shift from traditional working stereotypes and work-from-home trends to coworking spaces and hybrid working styles has compelled market players to adopt new business models with advanced technologies and offerings.
Retail Real Estate
Customers’ return to physical shopping destinations is driving up demand for high-end retail spaces. According to a report, retail leasing activity in Grade A malls and high streets reached 0.6 million square feet in Q3 2021, representing a quarter-on-quarter increase of nearly 165 percent. Increased business activities and transactions will gradually accelerate retail growth, increasing demand for retail spaces such as stores and shopping malls. Large-scale institutional investments get expected to boost India’s commercial real estate sector’s growth in the coming years.
The findings of the 2022 Outlook Report also highlight the 2022 trends and dynamics across real estate segments in India.
- In 2022, the residential segment gets expected to see a 5% increase in capital value.
- Based on robust hiring in the last eighteen months, the Top 5 IT companies’ incremental demand for office space is estimated to be 11.67 million square feet over the next one to two years.
- As the pandemic reinforces the need for agility like never before, the coworking sector will benefit. It will drive the demand rebound for flexible office spaces despite the normalcy.
- The office sector’s recovery and the flight-to-quality trend get expected to keep rents stable to rise in 2022.
- Transactions for warehousing get expected to grow at a CAGR of 20% from 31.7 million square feet in FY 2021 to 45.9 million square feet in FY 2023. It all owes to the e-commerce boom. During this period, the share of total transactions attributed to e-commerce gets expected to rise from 31 percent to 36 percent.
- The tenacity of Indian REITs during the pandemic and their growing popularity among retail investors will pave the way for other commercial real estate REITs.
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