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Recent Developments in Real Estate Sector
REAL ESTATE
Recent Developments in Real Estate Sector
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India house price index (HPI) rose by 3.5 per cent year-on-year in the fisrt quarter of 2022-23, according to Reserve bank of India. The growth in the HIPP was 1.8 per cent during January-March and 2 per cent in the April-June quarter of 2021-2022. The RBI said the year-on-year movements in HPI varied widely across the cities-ranging from a growth of 16 per cent in Kolkata to a contraction of 4 per cent in Bengaluru. On a sequential basis, all India HPI increased by 2.2 per cent in the first quarter of 2022-23. Delhi, Kolkata and Jaipur recorded sequential contraction in the index while it has risen for the remaining cities. The central bank releases its quartely house index (HPI) based on transaction-level data received from the housing registration authorities in 10 major cities. According to the recent Anarock research data, quarterly home sales in the top seven cities of India were recorded at 99,550 units in Q1 2022, representing a 71% year-on-year increase from the approximately 58,290 units sold in the first quarter of 2021. NCR and MMR, the two dominant realty hotspots, registered over 48% of total sales in the top seven cities with NCR witnessing an yearly increase of 114%. Many factors are influencing the real estate market in the wake of the debacle sparked by the COVID-19 pandemic. Additionally, historically-low home loan interest rates are encouraging real estate developers to offer a wide array of choices at an attractive price. Additionally, government-backed subsidy programs are also fuelling homebuyers’ enthusiasm. According to the price index Residex by National Real Estate Development Council, housing prices rose in 42 cities in the fisrt quarter of 2022-2023, while the rates of residential units fell in five cities and remained stable in three cities. All the eight major metros recorded an increase in teh index on an annual basis• Ahmedabad (13.5 per cent) • Bengaluru (3.4 per cent)
• Chennai (12.5 per cent) • Delhi (7.5 per cent) • Hyderabad (11.5 per cent) • Kolkata (6.1 per cent) • Mumbai (2.9 per cent) • Pune (3.6 per cent) On a sequential basis, the 50-city index registered an expansion of 1.7 per cent in april-June 2022 against 2.6 per cent in the previous quarter, it said, adding the index is showing an increasing trend on a quarter-onquarter basis since June 21. The housing Price Index (HPI) tracks the movement in prices of residential properties in select 50 cities on a quarterly basis with FY 2017-18 as the base year. Real Estate is one of the India's most powerful economic foundations. The rapid urbanisation, altering consumer behaviour, regulatory reforms, and the influence of COVID-19 are all fueiling this pillar's evolution right now. After being castigated by the pandemic, the real estate industry has begun to recover. The year 2021 marked a turning point in India's residential real estate sector. The strong home market momentum is predicted to continue in 2022 with sales likely to reach pre-COVID levels. The market is propelled forward by the implementation of initiativies that generate demand and encourage people to purchase real estate. The highest demand among buyers in the residential category has been for readyto-move-in apartments. The demand for the residential real estate in India's top cities has risen in tandem with the COVID-19 induced pandemic as the pandemic and successive lockdowns have caused a strong desire among people to own a house. Additionally, the pandemic has served as a reminder that one's home is the safest place to be during difficult times. The real estate business in India's undergoing a technological transformation. Several cutting-edge strategies and solutions are being implemented throughout the industry. As a result of these new developments, the market's growth trajectory has increased. CM www.constructionmirror.com
REAL ESTATE
MR. RAM CHANDNANI
Managing Director Advisory & Transactions Services CBRE - India
The real estate sector has come a long way since the onset of the pandemic. The Indian economic recovery remained resilient despite global headwinds and is reflected in the positive macroeconomic indicators. Leasing activity across all sectors and segments has witnessed an uptick in the past 6 months, and we expect this growth to continue into 2022. We expect the India market for alternate segments such as DCs, life sciences, etc., to mature further, enabling investors to diversify their portfolios and provide more investment opportunities. For instance, the focus on ESG is expected to accentuate across all sectors, even as tech such as AI and AR / VR finds more takers in the sector. As the economic recovery continues to gain momentum, we also expect the increase in leasing activity to bring a new focus on largesized and high-quality buildings by developers to differentiate their assets and attract occupiers. We also expect large institutional players to continue with greenfield investments via JVs / partnerships/platforms or brownfield investments via REITs, which would boost the upcoming supply in the coming years. Office: Record leasing activity drives the sector, positive leasing momentum to gain further strength. • Supply addition recorded at 26.1 mn sq. ft. in H1 2022, up by 26% Y-o-Y; leasing activity reached 29.5 mn sq. ft. during the period, a rise of 157% Y-o-Y • Supply addition of 16.7 mn sq. ft. seen in Q2 2022, up by around 78% Q-o-Q and 64% Y-o-Y; leasing activity was recorded at 18.2 mn sq. ft., a rise of 220% Y-o-Y and 61% Q-o-Q • Small- to medium-sized deals (up to 50,000 sq. ft.) dominated space take-up with a share of almost 84% in Q2 2022. • Bangalore, Delhi-NCR and Hyderabad dominated space take-up, with a combined share of 67% in Q2 2022 • Hyderabad, Delhi-NCR and Bangalore together accounted for 76% of the supply addition in Q2 2022
Outlook:
• Leasing to pick up momentum going forward; space take-up would be attributable to the release of pent-up demand and expansion & consolidation requirements of occupiers. • As the recovery momentum remains upbeat, differentiated and high-quality institutional supply in core markets would continue to draw flight-to-quality absorption. • Flexible work patterns have increased in prevalence, but several occupiers are yet to formally define hybrid working and formulate relevant policies and guidelines. This is likely to take place over the next few quarters. • Large institutional players to continue with greenfield investments via JVs / partnerships / platforms or brownfield investments via REITs, which would boost upcoming supply in the coming years.
• Greater emphasis on flexible seating arrangements observed as the office becomes a centre for collaboration; buildings that are ‘futureproofed’ via a combination of leading-edge physical, human and digital elements likely to witness higher demand. Industrial & Logistics: Resilient sector poised for sustained growth. • I&L leasing activity in Q2 2022 reached 6.1 million sq. ft. • 3.6 million sq. ft. of supply addition witnessed in Q2 2022 • With a share of ~57%, medium- to largesized deals (more than 50,000 sq. ft.) dominated leasing activity. • Bangalore led absorption with a 25% share, followed by Chennai (21%), Mumbai (15%) and Delhi-NCR (15%) • From a sectoral perspective, 3PL players (58%) and engineering & manufacturing (14%) firms were the key drivers of demand. • Rental growth witnessed in Hyderabad, Bangalore, Pune and Mumbai.
Outlook:
• Space take-up likely to remain range bound at about 28-32 million sq. ft., led by the continued expansion of 3PL players. • Focus on operational efficiencies could lead to growth in ‘flight-to-quality’ leasing; development completions by organised players to increase in line with the demand. • Increased focus on upgradation / expansion opportunities in tier I cities; new market penetration in lower tier cities and extension of local distribution networks in emerging logistics hubs to drive leasing • Warehousing facilities with features such as high ceilings to accommodate automated stacking systems, sufficient loading / unloading zones and power back-up provisions likely to gain more traction. • Capital flows to continue from both global and local players, with both greenfield and brownfield acquisitions remaining attractive. Retail: Sector back on growth trajectory • Retail leasing activity touched ~1 million sq. ft. in Q2 2022, up by nearly 363% Y-o-Y and about 118% Q-o-Q. • Leasing activity in H1 2022 was up by about 167% Y-o-Y • Supply addition in H1 2022 touched 0.81 million sq. ft., up by about 523% Y-o-Y • Fashion & apparel players drove the leasing activity with a 28% share, followed by homeware and department stores and entertainment centres (14% each) • Delhi-NCR led absorption with a 25% share, followed by Hyderabad (20%), Bangalore (17%) and Chennai (13%)
Outlook:
• Despite an uptick in online shopping, brick-and-mortar retail is here to stay – a mix of both is becoming prevalent across brands. • Retailers are likely to continue to focus on the three Rs - resizing, rightsizing and relocating - in order to ensure long-term growth and broaden their customer base. • Retailers are expected to continue to reinvent their marketing strategies such as adding a touch of 'experience' to their physical stores and think of innovative ways to engage with customers. • Technology would become a key enabler; virtual fitting rooms, fit scanners, smart mirrors, iBeacon, visualization tools, etc. are likely to provide a seamless experience to the consumers.
Others:
o Customers’ expectations of a shopping experience at malls or individual stores have evolved. While brick-and-mortar retail will remain key going forward, store design and location strategy are likely to evolve in response to consumers’ changing expectations ◊ Brands and retailers alike are rethinking their business strategies:
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REAL ESTATE
not only to meet the evolving customer demand but also to increase profitability. o From a luxury retail perspective, it is the right time for designers to capitalize on the brand value they have created. ◊ Brand consolidation is one such step taken to boost reach and marketability. In most cases, ace designers will continue to function independently of the larger conglomerate, but they can now scale up at a much faster pace, thanks to stronger financial backing. ◊ On their part, larger conglomerates have not just gained a brand name, but the talent for growth. In fact, such brands, in the future, can cater to the larger luxury clientele globally. Residential: After scaling another sales peak in Q2 2022, sector poised for a strong 2022 • Housing sales jumped 121% Y-o-Y to about 76,000 units in Q2 2022, recording 9% Q-o-Q growth. • Number of units sold touched 146,000 in H1 2022; up by 72% Y-o-Y and 30% on a half-yearly basis • ~76,500 units launched Q2 2022; up by 117% Y-o-Y and 26% Q-o-Q • ~137,000 units launched in H1 2022, up by 66% Y-o-Y and 16% on a half-yearly basis • Pune, Mumbai, and Delhi-NCR dominated sales in Q2 2022, with a cumulative share of more than 63%. • The mid-end and affordable / budget segments cumulatively drove 76% of the sales in Q2 2022
Outlook:
• Residential real estate poised for a strong year in 2022, with both supply and new launches expected to post a robust performance; uptick in new launches expected especially in Pune, Mumbai, Hyderabad, Bangalore, and Delhi-NCR. • Asset prices are likely to witness an uptick on account of strong momentum in sales as well as developers’ decision to pass on the rising input and labor costs to buyers. • High-end, and premium segments are anticipated to gain traction, fueled by the anticipated appreciation in capital values and increased activity by HNIs and NRIs. • Robust sales led to a fall in unsold inventory across most cities on a Y-o-Y basis despite steady new launches, inflationary trends and monetary tightening measures. We expect this trend to sustain in the near term. RE Investments: Sector in growth mode after posting strong performance. • USD 2.0 billion Capital inflows in Q2 2022, up by 47% Q-o-Q and 9% Y-o-Y • USD 3.4billion Capital inflows in H1 2022, up by 42% on a half-yearly basis and 4% Y-o-Y • Office sector (57%) dominated investments; followed by land / development sites (30%) and retail sector (10%) in Q2 2022 • Delhi-NCR, Chennai and Mumbai contributed ~90% of cumulative share of in the total investment quantum in Q2 2022 • Institutional Investors led investment activity with a share of nearly 65%, followed by developers (31%) during Q2 2022 ◊ Institutional investors have primarily infused equity in brownfield assets, whereas developers continued to make greenfield investments • 67% was the share of foreign investors in the total investment volume in Q2 2022. Among them, Canada single-handedly garnered a 59% share, followed by the US (6%)
• ~70% was the share of the capital inflows that were deployed for pure investment / acquisition purposes during Q2 2022; the remaining 30% was committed to development / greenfield projects
Outlook:
• Interest in PropTech firms and RE ancillary companies anticipated to increase amidst boom in the residential sector and revival in other sectors. • Alternate Investment Funds (AIFs) will remain a major lending source to the commercial real estate sector as NBFCs
also plan to set up AIFs to cater to funding requirements. • Investments into REITs expected to increase owing to portfolio expansion and launch of new REITs across office,
I&L and retail assets. • An upward trajectory is anticipated in the financing cost amidst the monetary tightening measures undertaken by central banks worldwide to tame inflation; margins could see some pressure.
MR. RISHI JAIN
Managing Director Jain Group
The market is stabilizing. Affordable housing segment’s growth has been seen in the range of 8%-12%. Mid-scale housing growth has been seen at 15% larger. The 3 Bhk flats are seen as the maximum uptake.
Everybody is looking to upgrade their lifestyle. The number of hours a person is staying at home is still higher than in 2019. Hence, the requirement for quality housing spaces is increasing. It is a good time to look for properties to buy as there is no fear of EMI's rising sharply.
For the past 3 quarters, there has been a steady rise in the real estate industry. Larger homes are taking preference over compact homes. The sector will have to overcome costing challenges. However as logistics stabilize, the costing challenges would also stabilize.
REAL ESTATE
MR. ABHISHEK BHARDWAJ
Chief Marketing Officer Shristi Infrastructure
What are the emerging trends in Real Estate 2022?
The real estate market is stabilizing and we have seen a steady growth. Our prime focus is the development of housing segment alongwith township development in Tier 2 cities, that has seen an increase in demand. People have understood the importance of owning a home post the lockdown debacle, and hence, demand is on the increase.
The real estate market in India has been typically an informal market characterized by informational asymmetry and other bottlenecks that have hindered the formation of a formal market for the real estate. It is a good time to look for properties to buy as there is no fear of EMIs rising sharply.
Slowly, we are getting back to normal. When the pandemic hit, the Real estate market was affected negatively. Now we can see a steady rise in the sales and a demand for larger and spacious homes. Raw material prices have increased which is having an effect on the price of the end product.
MR. AMAR SARIN
CEO & MD TARC
“The residential real estate sector clearly shows signs of exponential improvement in 2022. The demand for larger apartments in gated communities with a variety of built-in amenities and lower mortgage interest rates has surely increased market momentum. The culture of working remotely is one of the critical indicators fuelling this rise in demand.
Young professionals want more space with a touch of sophistication and all the convenience perks they can get in order to maintain a lifestyle to which many of them have grown accustomed. The pandemic has also taught us the importance of community living and the significance of safety and tranquilly. The comfort and certainty that the RERA offers, which has also enhanced NRI investments, has been a major contributing factor to the expansion of the real estate market. Online house sales and purchases have also surged in popularity over the past several years, which has compelled the real estate industry to be adaptable and quick to embrace new technologies. Institutional real estate investments in India totalled $2.6 billion in the first half of 2022, an increase of 14% over the same time in 2021. The revival of Indian real estate after the setbacks brought on by Covid-19 gives investors hope and encouragement. The second wave of COVID-19 had a modest impact on the luxury real estate market but it quickly recovered. It is not simply the luxury property itself that is motivating people to upgrade to luxury residences, but also the lifestyle. The expansion of our luxury residential segment in New Delhi is our current priority at TARC. As far as the secondary market is concerned, it is a highly segmented institution. Its primary job is to facilitate price discovery for similar assets, however there is no scientific technique for markets to calculate pricing due to product differentiation, low levels of transparency, and many hidden costs. This somewhat prevents the discovery of the price. Therefore, it is essential to consider the secondary market and the substantial role that it may play in boosting the sector as a whole.”
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