Sahil Kapoor, national head, 360 EDGE, on the overall real estate sector
Real estate in India currently constitutes around ~7% of the overall GDP. The housing market alone is worth around $180 billion. In the next 20 years, the sector is expected to expand its foothold to 13% of the total Indian GDP. After agriculture, it is the second-largest source of employment in the country. In a post-covid world, when real estate sales have started to pick up and the market is quickly moving towards normalcy, real estate, as a sector, will play a pivotal role in the economy.
Real Estate and construction activities have taken a blow. The migrant labour crisis and disruption in the supply chain has further aggravated the challenge. However, as the macroeconomic conditions are improving, sales are also increasing at a remarkable pace.
It might sound counterintuitive, but these might be some of the best times to own a home. The home loan rates are at an all-time low in the last two decades, prices are subdued in the market, and there are plenty of attractive payment plans. The times are conducive to own a home. Add to that the upcoming festive frenzy, which will further fuel the momentum.
New opportunities will unravel in the commercial space
In contrast to the residential segment, commercial realty has been hit hard. As economic and business activities have slowed down, commercial leasing has taken a beating. it will take at least two more quarters for the market to recover.
Nevertheless, there is a likelihood of new opportunities to emerge. For instance, take the case of data centers. The country has witnessed 14 major data centers deal in recent times as per Budde, an independent technology research agency. The steep rise in cloud-based technology, growth in social and digital media consumption and government regulation to localize data storage will continue to fuel demand for data centers in the country. The Indian data center market is sized at around $4.5 billion. Japan-based NTT has announced plans to invest $2 billion in the next 2 years.
Likewise, a new era is expected to unfold for warehousing and industrial land in the country. As organizations around the world are diversifying their supply chain, there is renewed interest in setting up manufacturing in India, which is boosting demand for warehouses, plug & play factories, and industrial land. Likewise, growth in e-commerce and the pharma industry is also pushing ahead the demand for warehouses and storage infrastructure. Consequently, rentals are rising in warehouses in Mumbai, Delhi-NCR, and Bangalore. Major international PE players such as Maple Tree and Blackstone have acquired large-sized warehousing assets in the country, which further underscores the importance of the asset class.
Fortune at the bottom of the pyramid
There is a tremendous demand for affordable housing and rental projects in India. Industry estimates suggest that in Indian cities, the total housing shortage is roughly to the tune to 500 million and the gap will widen if not plugged properly. This also suggests that there is a huge potential in the affordable segment. However, to properly capitalize the same, there is a need for more coordinated steps between the governing agencies and the developers. Recently, the Gujarat government has allowed developing affordable projects in farmlands. Likewise, they have decided to deploy a faster approval process for affordable homes and offer interest subsidies on FSI charges. For the noble idea of affordable housing initiative to reach its fruition, it is essential to offer strong policy impetus and support.
Technology is the way ahead for real estate. As the realm of physical and digital is blurring, proptech will play a much more pivotal role as it will be no more just about bringing disruptions or business continuity. Rather, it will be now used for value addition throughout the value chain. Digital & virtual viewing has jumped after the covid times and the popularity of digital events are on an upswing. Digital marketing is opening new avenues to secure qualified leads at historically lower rates. API integration with CRM is shortening and streamlining the operational cycles. Likewise, analytics and big data will play a big role. Investors, surveyors, banks etc. will use machine learning to conduct multivariate data analysis for property valuations, portfolio valuations, and collateral calculation. Although data science in Indian real estate is still a nascent industry, in a post-covid-world, which necessitates a more robust valuation methodology, it is surely going to see larger applications.
Not only will real estate benefit from technology, but the association will also enrich the Indian entrepreneurial ecosystem. Already profitable associations are being forged between proptech startups with developers & advisories. In the coming time, there will be huge opportunities in the burgeoning proptech space.
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