India’s real estate stock to grow by 200 mnsqft in 2019
CBRE South Asia Pvt. Ltd., India’s leading real estate consulting firm, yesterday announced the findings of its Real Estate Market Outlook 2019 - India. As per the report, India continues to retain its position as the world’s fastest growing major economy, on the back of improved investor confidence and better policy reforms. The IMF’s database also suggested that India’s contribution to world growth has increased from 7.6% during 2000-2008 to 14.5% in 2018. The CBRE report highlights 2019 trends and dynamics across various segments in the real estate sector in India. Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa said, “The current government’s pro-reform policies have yielded positive news for the equity market and investment inflows, thereby positioning India as an attractive business destination. The growth of the Indian Real Estate market in 2019 will be driven by numerous factors including technology, demand-supply dynamics, improved ease of doing business rankings and the dust settling post the implementation of reforms such as GST, RERA among others. We expect to see significant growth across segments, which will lead to the addition of almost 200 million sq. ft. of new real estate space in 2019 across categories including office, retail, residential and logistics”. Technologies such as Artificial Intelligence, Augmented Reality, Internet of Things, Robotic Process Automation and Blockchain are trends that are reshaping how the Real Estate sector works. For instance, AI is allowing for more productive location decision making, predictive maintenance of assets, easing portfolio planning, reconfiguring workspaces, automating FM processes and making spaces smarter. Similarly, IoT is allowing for the construction of smart buildings and smart cities, while creating more data for analytics also across portfolios, fine-tuning portfolio management decisions and enabling more accurate valuations. The year 2018 was a landmark one with office space absorption crossing an all-time high of 47 million sq. ft. (up 5% y-o-y) across the nine leading cities, boosted by a supply influx of 35 million sq. ft. (up 17% y-o-y). Bangalore and Delhi-NCR continued to dominate take-up; Hyderabad emerged as the third most preferred office destination, overtaking Mumbai. 2018 was a remarkable year for the warehousing market as overall absorption during the year touched 24 million sq. ft., a growth of about 44% compared to the previous year. Majority of the demand was concentrated in Mumbai (23%), Delhi-NCR (19%) and Bangalore (19%), closely followed by Chennai and Hyderabad accounting for about 15% and 12% respectively. Following the expected trend, 3PL players, e-commerce and engineering & manufacturing firms drove demand during the year contributing about 35%, 23% and 15% respectively. Markets which led rental appreciation during the year were Bhiwandi in Mumbai (23%), Western corridor in Hyderabad (20%), NH-6 in Kolkata (16%) and Northern belt in Chennai (11%). The Indian retail sector has been evolving at a fast pace in the past couple of years. Increasing urbanisation, evolving brand preferences, availability of technology and social media have been the driving factors behind this evolution. In 2018, nearly 5.1 million sq. ft. of new retail developments became operational across the seven major cities in the country. Supply was led by the Southern cities, with Hyderabad at the forefront; followed by Chennai and Bangalore. Smaller retail developments also became operational in Delhi-NCR and Kolkata during 2018. Demand on the other hand has also been strong and the past couple of years have witnessed a divergence in the demand and consumption pattern of consumers in India. During 2018, the commercial real estate investment market witnessed few large-scale deals which led to about USD 4.7 billion of investments. Transaction activity was led by private equity investors focusing on office and retail sectors, while local investors focused on investing in land parcels for RE developments. The inflow of long term, patient capital from private equity and other institutional players – especially in office and retail has provided the sector with stability that will ensure a steady growth curve. Post the policy reforms of 2017 such as demonetisation, RERA and GST, the residential market is absorbing the impact of these changes and is on the path to recovery. This led to a growth of about 15% y-o-y in new supply and 13% y-o-y in sales. As developers align themselves with structural policy reforms implemented in the past few years and with changing characteristics of demand, we can expect residential supply to improve in 2019. The residential market is better placed this year as speculation-led investment activity has reduced significantly and financial checks are in place to prevent over-gearing. In terms of segments, mid-end projects will still garner the major chunk of supply, followed by the affordable segment (owing to government incentives and increase in end-user demand). The uptick in launches is expected to be witnessed in Bangalore, Mumbai, Hyderabad and Chennai, whereas launches in Kolkata and Pune are expected to be stable.
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