Indian real estate in the post-COVID-19 era

Abstract

COVID-19 forced upon the world an unprecedented number of transformative changes that not only posed significant challenges, but also brought with it opportunities for business. However, India’s real estate sector had already been through its own transformative phase in the years leading up to 2019, with three major policy interruptions — demonetisation (2016), introduction of the Goods and Services Tax (2017) and real estate regulatory authority (2016). After the initial shocks, Indian real estate had begun to rebound, and it was widely expected that this would continue into 2020. But with the advent of COVID-19, real estate was widely expected go into a slump. Today, as we see things in hindsight, COVID-19 has accelerated some of the medium-term transformations that were largely expected to bring Indian real estate level with global best practices. A sustained revenue growth of India’s largest occupier segment — the IT-BPM sector — helped office gross leasing levels in 2020 and 2021 (forecast) stand similar to the average levels clocked in last six years (2014–19). Total workplace ecosystem is a now a more critical factor for occupiers than office rentals and building quality. Testimony to that effect is the higher number of managed spaces (offered by co-working) in 2020 and 2021. In the retail sector, experiential retail is now seen as a major driver of growth for retailers, rather than merely securing a physical store presence. The predominantly unorganised industrial spaces are paving way for stronger demand coming for operators in the organised sector. Data centres are fast emerging, driven by the digitalisation and data localisation. These growth opportunities have naturally attracted attention from institutional investors in the real estate sector. Recent successes by maiden REIT listings in India provide impetus to investors. This paper aims to highlight these sector-by-sector understanding of the transformational forces underway in the Indian commercial real estate, and it appears unfazed by the on-going uncertainty around COVID-19.