2020 has been a rather tumultuous year which has led to a huge shift in how we interact with the world. Real estate, which is much beyond just buildings made of brick and mortar and is in fact an enabler of our sustenance and well-being, will also perform differently from what we have seen in the past. The industry has gone through a roller coaster ride in 2020 and winds of change are already being seen both on the consumer and developer front.
Home Buying for Self-Consumption: The changing millennium mindset over the last few years had started favouring rental homes thus challenging the established Indian mindset of “being settled” only with home purchases. The pandemic is driving back that desire to own a home especially since the need to stay close to office has reduced for many. There is an increasing tendency to move away from the populated and polluted city centric areas to more affordable suburban locations. The more affordable cities in India will see a preference towards plotted developments or builder floors over apartments. On the other hand, in cities like Mumbai, we will see a tilt towards gated communities vis-à-vis single building developments because of the multiple advantages gated societies tend to offer.
Builder Confidence to Drive Sales: Corporate developers who have a strong financial backing and brand equity will gain a higher market share. Stressed and weaker players have already started divesting their assets either through development management agreements or business takeovers. This trend will only get more pronounced and use of technology to bring in efficiencies will eventually lead to better customer centricity and confidence.
Workplace Changes: This is especially true for IT/ITeS companies where the work-from-home model is increasingly becoming an integral part of their long-term strategy. Business CEOs across the globe are already looking to minimize costs and real estate does become the first target. The trend of consolidation at one place which was being considered by companies may now get realigned to the hub and spoke model. We may thus see more smaller properties being taken up vis-à-vis single large offices. None the less, health and hygiene and social distancing norms would take precedence over space efficiencies and workplaces would be realigned for the post-covid world.
Foreign Investors will Continue to bet on Commercial Real Estate: foreign investment continues to be buoyant on the rent yielding asset segment. Even during the lockdown, there has been good demand from foreign investors for quality assets in India thus showcasing the confidence in the sector example being Brookfield-RMZ, Blackstone-Prestige deals which have been in the news. Similarly, from an institutional investor perspective, REITs will continue to be the key theme and we will have more REITs hitting the capital markets in 2021.
An asset class which has been a direct beneficiary of the various changes is the warehousing and logistics sector which will continue to see significant demand from various sectors like ecommerce, 3PL, FMCG, pharma, etc and we will see a lot of traction in this space. Thus, even though 2020 was challenging, the real estate sector has the potential and is poised to be one of the key drivers for supporting the overall growth in the economy.
