The real estate sector is going through what can be described at best as ‘interesting times’, says industry expert Shrinivas Rao
Policy changes in 2017 led to a lot of expectations of 2018, including the easing out of RERA and GST’s teething troubles and a new order of transparency and efficiency. While 2018 lived up to a fair number of expectations, there were a few misses too, particularly in the case of clarity on GST norms. Key highlights of 2018 were the creation of positive sentiments in the market by way of a robust office space absorption by emerging segments, as well as increase in the number of new launches and sales in the affordable housing sector. Thus, the year gone by was mostly a period of work-in-progress, renewing hope for the revival of the real estate sector.
Here are some of the key expectations from the new year:
Office market to remain steady, co-working to gather strength – Office space absorption will continue to rise steadily, backed by strong economic fundamentals and favourable sentiments exhibited by occupiers and investors. Despite the planned supply, healthy pre-commitments of space in under-construction projects will continue to be the norm, leading to vacancy rates to remain under pressure in key office markets. While IT/ITeS and BFSI companies will continue to be the major demand drivers for office space, increased demand is envisaged from co-working and fintech start-ups. Co-working segment is expected to account for a larger share of the market in 2019, portending a major shift in workspace dynamics.
Affordable housing to lead the way – While 2017 proved to be a period of learning for industry stakeholders, the most potent opportunity was seen in the affordable housing segment. And 2018 witnessed a fair revival in the residential market, buoyed by new launches and sales in the affordable housing sector. Thus, the sector is projected to continue to drive the market growth in 2019, aided by the transparency brought about by policy implementation while bringing back investors into the fold. Meanwhile, besides the granting of infrastructure status to the segment, the government is also in favour of a substantial GST rate cut on housing and is currently working to build consensus with the States to push this through. These factors bode well for the residential market in the coming year.
Strong growth in warehousing and logistics sector – The country is poised to witness a strong growth in its warehousing and logistics sector in the coming year. The sector has seen a remarkable transition in the past few years, growing from a largely unorganised sector to observing the advent of organised players, reflecting a change in the mindset of occupiers. Moreover, with infrastructure status accorded to the warehousing and logistics sector, accessibility to longer tenure financing facilities at a reduced cost of debt will aid in the development of larger, organised logistics parks in the country.
Emerging sectors – The newer concepts such as co-living, student housing and senior living, besides co-working, are still nascent, with immense potential for growth. As such, the growing number of youth willing to consider co-living spaces in big cities has gained traction, given the steady growth of entrepreneurship and freelancing in the country. Going forward, the concept of co-living and student housing holds significant potential to boost the rental housing segment in the country. The inherent advantages of opting for a co-living rental arrangement, that entails a hassle free, flexible plug-and-play model, is expected to attract more tenants into its fold.
A combination of factors is expected to influence the general elections in 2019, ranging from demonetisation and GST to a credit crunch affecting asset creation. However, India’s GDP growth is expected to hold strong and this would play an important role in attracting investors to the country.
There are also several large-scale, key infrastructure projects underway, the completion of which bodes well for the country.
(The author is a real estate industry expert and the founding member of Vestian Global Workplace Services)
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