The recently released JLL FICCI report indicates that office, affordable housing and student housing segments of realty are set to surpass previous highs in terms of space and investment.
According to Ramesh Nair, CEO & country head at JLL India, “India’s real estate sector is at an inflection point and the evolutionary trends in the sector are paving the way towards sustainable growth of the industry. H1 2018 has seen phenomenal growth in Grade A office space from both, the demand and supply side. Private equity interest in Indian retail realty is at an all-time high with the sector witnessing an investment of Rs 950 crore in 2018. With regulatory reforms such as RERA and GST showing results, the sector is poised to grow exponentially. Student Housing, a new emerging sector presents a tremendous opportunity for the market.
Adds Sanjay Dutt, chairman FICCI Real Estate Committee, “The sector has been through a bumpy ride in the last couple of years, but the environment is changing and the sector is back in the spotlight with key indicators pointing at the revival of Indian real estate. Key regulatory reforms such as RERA and REITs have given a new lease to the sector, and investors and end users are regaining confidence towards the recovery trends in the industry. Logistics & warehousing, and commercial & retail are witnessing a surge in demand and absorption. Overall trends are moving in the right direction for the Indian real estate sector.”
The extent to which the real estate sector has grown can be gauged from investments in ‘under construction’ projects within investment grade real estate. This number, which was about $173.9 billion in Q4 2012, has touched $242.6 billion in Q2 2018. India has moved up 30 ranks to the 100th position on World Bank’s scale of countries in Ease of Doing Business for 2018.
Overall, strong economic fundamentals, proactive reforms and the use of technology will continue to boost the sector. Apart from the conventional sectors, the emergence of alternative segments (student housing and senior living) and greater demand from sophisticated logistics in the warehousing space is expected to be the drivers for robust growth and a promising future for the sector.
Office Market: Steady Growth and Stable Vacancy Rate
- Suburban sub-markets are playing a bigger role; contributing more to office activity
- Co-working has almost doubled to 9% in H1 2018 over CY 2017
- Bengaluru is likely to see the highest absorption during 2018-2020; absorption rate in Mumbai to surpass supply during the same period
- NCR, Bengaluru and Hyderabad will contribute more than 60% to total supply in 2018-2022
Retail: Predictive Analytics to Aid Future Growth
- As of 1H18, India’s Grade A completed stock in the retail segment stood at 77 million sft, and is expected to reach nearly 103 million sft by 2022
- Delhi-NCR is likely to witness highest absorption during 2018-2020; closely followed by Hyderabad
- Absorption levels in Mumbai and Kolkata to surpass the supply during 2018-2020
- Mumbai to lead rental growth trends; with other markets witnessing marginal rise
Residential: Affordable Housing Holds the Key
- The number of new launches crossed the 40,000-unit mark for the first time after eight quarters in Q2 2018
- Bengaluru and Mumbai remain the major contributors to new residential launches
- Launches within the Rs 40 lakh pricing bracket were the highest during 2017 and H1 2018
- Affordable housing finance is estimated to burgeon into a Rs 6 lakh crore business opportunity by 2022
Logistics & Warehousing: The Evolutionary Leap Forward
- India is set to witness investments of close to Rs 50,000 crore for creation of warehousing facilities across the country between 2018 and 2020
- The sector is expected to grow at a CAGR of 22.2% in the period 2018 to 2020
- Large infrastructure projects like DFC, DMIC, Sagarmala and Bharatmala to drive growth of the sector
- Total cumulative stock of 138.5 mn sft was recorded in 2017 for Grade A and Grade B across eight primary locations
Student Housing: An Emerging Sector
- Student housing has the potential to yield more than 12% returns vis-a-vis the core commercial sector in which returns remain range bound between 7% & 10%
- This sector is expected to grow at a 38% CAGR until 2020, to Rs 2,400 crore
- The sector is still at a nascent stage with the top 15 players dominating the organised space; cumulatively operating around 84,500 beds and plan to grow to 1,60,000 beds by 2020
- 2020 Office absorption projected to surpass the historic high of 2011, which stood at 37 mn sft
- Affordable housing, logistics & warehousing will be new growth drivers
- Student housing is expected to be a Rs 2,400 cr market by 2020
*Logistics & Warehousing: The figures indicate total Grade A and B warehouse stock
**Student Housing: Calculations based on number of beds at an average annual fee of Rs 1,50,000
