The return of large transactions will increase the absorption of real estate space by 15 to 20%: CEO of Colliers
Global investors looking for stable returns and stable returns should have high exposure to new-age real estate assets from India such as data centers, cold stores, coliving and other emerging portfolios in India. 2022, said Ramesh NaÃ¯r, CEO, India and Managing Director, Market Development, Asia, Colliers, in an interview. Extracts:
What are the factors that would bring the recovery of the Indian real estate sector in 2022?
The year 2022 should see real estate growth, after having faced the shocks caused by the pandemic in 2020. Economic activity is in full swing, with GDP growth set at 9.5% for 2021-2022. The rapid pace of vaccinations encourages occupants to bring employees back to the offices. Driven by the growth of e-commerce and the need for same-day delivery, the warehousing sector is expected to experience increased growth in the coming quarters.
Technology will continue to be the predominant theme in the real estate industry. On the residential front, sales momentum is expected to continue in 2022. Low mortgage rates, stamp duty concessions and realistic prices will give confidence to homebuyers and fence guards. Big deals are back in the industry and this trend will increase absorption by 15-20% in 2022 compared to last year.
What is the cumulative business loss of the Indian real estate industry due to COVID-19?
The construction and real estate sectors have come to a screeching halt following the nationwide lockdown and a series of restrictions announced over the past two years to contain the spread of the virus. Reverse labor migration has added to the developer woes. Negligible buy and sell transactions were reported. The sluggish business environment exposed developers to a serious fund crisis. The loss of production in the sector can be measured by the fact that the gross value added (GVA) of construction contracted by 8.6% in 2020-21. At the same time, financial and professional services, which includes real estate, fell 1.5% in 2020-21 from 7.3% in the previous year (before COVID).
Can you give us an idea of ââthe expected foreign fund flows in Indian real estate by 2025?
Investment flows from foreign private equity investors have visibly increased over the past two years and are expected to increase over the next 3-4 years.
Over the next three years, we expect more foreign investors to enter the Indian market. We anticipate that more capital will be deployed in mixed-use, office and warehouse assets, as more investment platforms are formed between global private equity funds and local developers.
In addition, over the years, global private equity (PE) players, sovereign wealth funds and pension funds have gradually increased their footprint across all asset classes, owing to reforms and easing of FDI and of the real estate sector. With the increase in digital adoption and e-commerce during the pandemic, warehouses and data centers have attracted a lot of investor interest in recent times. Additionally, the success of listed REITs has opened up a new avenue for investment. As a result, institutional investments have shown resilience despite the pandemic and this momentum is also expected to continue in 2022.
How are real estate agents coping with post-COVID changes in customer behavior?
It is true that the pandemic has triggered massive reverse migration in the country. This only exacerbated the distress of developers who were already struggling with business challenges. However, the market began to improve with the unblocking of the economy and the resulting improvement in the business environment. Developers have now recalibrated their products and pricing strategies to align with the changing preferences of home buyers. They’ve taken a more flexible and accommodating approach to serious buyers. They have been timely in handing out lucrative offers, discounts and freebies during the holiday season, thus registering higher sales.
Do buyers want an increased level of comfort in their home as they stay and work from home?
The pandemic has boosted homeownership, and the desire to own a home may be stronger than ever. The combined impact of historically lower interest rates (6-7% from highs of 11-12% a decade ago), realistic prices and compelling developer offers has created an affordable symphony in the market. . With the hybrid model of work and education, there is a greater demand for larger apartments, gated communities teeming with amenities and wellness features. Buyers are now focusing on arrangements to ensure the presence of balconies and an additional room for work and children’s lessons.
Can you give us a realistic view of office occupancy?
After suffering a slowdown due to the second wave, office rental increased 89% in Q3 2021, with 10.3 million mÂ² of gross absorption, the highest volume recorded since Q1 2020.
We expect optimism to strengthen further over the next few quarters in 2022. Large deals are back in the market and occupier confidence is returning. However, some uncertainty hangs over the new Omicron variant. Developers and occupants are expected to remain cautious in their decisions in the first quarter of 2022.