Changing consumer behaviour, in view of the pandemic, has altered preferences for the real estate sector, which is ready to bounce back as India slowly opens up to new hopes.
To study the emergence and impact of these changes, Deloitte Touche Tohmatsu India LLP (Deloitte India) released a survey-based report, titled ‘Reality of realty in a post-COVID-19 world’ today, defining key trends that are expected to contribute to the revival of the sector in the new normal.
As per the survey, a rise in demand has been witnessed for residential real estate in metropolitan and Tier-II cities, while commercial real estate is also seeing green shoots with expansion by GCCs.
Commenting on the pace of transformation of the real estate sector, Vijay KR, Partner, Deloitte India, said, “The real estate sector has picked up from where it left off with increased interests from individual buyers in residential real estate, rapid expansion from GCCs looking to return to office, and micro warehousing. With lower interest rates playing its part, along with government support, we are witnessing increased optimism in most sub-sectors.”
Key trends include
Residential: A safe haven
# While residential real estate was severely affected by the first wave of the pandemic, the sub-sector was quick to regain its balance. Seventy-four percent respondents expected an increase in demand for the residential sub-sector, of which, 86 percent indicated a 10-20 percent increase.
# The survey highlights the impact of the Model Tenancy Act, 2021 in regulating the rental space and boosting interest in co-living spaces, but also showcases how buying residential properties seems to be at the forefront of emerging trends.
Commercial: Winds of change
# The survey indicated healthy growth on the anvil for the commercial real estate sub-sector as people return to offices and adapt to hybrid working models. Sectoral growth is envisaged by many respondents, with the banking/FSI, health care, manufacturing, and similar sectors, looking to return to office full time.
# Based on the results of the survey, significant growth is expected in the co-working sub-sector by many respondents, majorly fuelled by the demand for hybrid working models and the cautious approach of many organisations towards taking up commercial real estate on a full-time basis.
Retail: Awaiting footfall
# The response to the survey indicated that in the retail sub-sector, the demand for brick-and-mortar stores seems unlikely to pick up in the short term, given the seamless e-commerce operations that offer home deliveries for most general purchases.
# The survey, however, indicates that high-value and luxury buying that involves “touch and feel” is likely to spur demand in this area. The recent festive season has shown tremendous growth in footfall, despite concerns over the spread of COVID-19.
Warehousing: Building on demand
# The response to the survey reflected deep conviction amongst the respondents towards an ongoing growth story in the warehousing sub-sector, fuelled by online shopping and the demand for space in Tier-II cities. Respondents also indicated that the evolution of the micro warehouse was the way of the future and would result in significant savings in developmental costs.
# The survey revealed that 98 percent respondents believe that the demand for micro-warehouses will benefit residential areas, of which, 61 percent believe that new developments have already factored in the possibility of creating micro-warehouses.
Data centres: In the spotlight
# With “technology”, “innovation”, and “data” taking centre stage, owing to the digital narrative, respondents to the survey have predicted a significant demand for new data centres. Eighty-eight percent respondents from the survey voted for increased demand data centre real estate, after COVID-19.
# Moreover, data privacy and data localisation policy reforms and initiatives by the government mandate India Inc. to focus on local establishments.
# Fifty-six percent respondents anticipate significant growth in demand for newer data centres.