An Executive Summary:
After one and a half years of gradual consolidation, real estate in India has fathomed its own comfortable ground, and is poised at the right threshold to take a giant leap in years to come. While a differential pace of strengthening is evident across sectors, geographies and segments, several property market indicators point to the fact that the industry has indeed bottomed out in the current cycle. The fears of a possible double dip recovery have given way to beliefs in the sustained healthy levels, if not a rapid growth.
The experience thus gained in this slowdown is invaluable and will serve real estate strategists for years to come. The various stakeholders in the entire supply chain – the material manufacturers, developers, property consultants, occupiers, investors and policy makers, have all emerged stronger and primed than yesteryears. And, if we have taken our lessons right, ‘caution’ and ‘diligence’ would be the keywords for the industry in the medium term.
On one hand, the stakeholders can’t afford to sway on the riding waves of healthy demand, and lose the ground advantage that they have so painfully regained by adapting to the rapidly changing business environment. And on the other, the emerging opportunities should be targeted with an unmatched fervor of potential and pragmatism.
The year 2011 would usher a new decade of opportunities for Indian real estate, which will be a test of sorts for its stakeholders between these two fringes of the fulcrum. And the winners would be the ones who balance caution with diligence evaluating all the potential opportunities with pragmatism.
Outlook: Commercial Real Estate
- Office rents to start appreciating after mid-2011
- More outright purchases by occupiers as well as private equity players
- IT/ITES and BFSI would continue to account for 60-70% of office demand
Outlook: Residential Real Estate
- Launch of premium products to continue, albeit at a slower pace
- Launch of Ultra Low Cost (ULC) Housing by private developers – ‘Housing for all’
- Large number of launches would continue to be in the range of INR 2,000-3,000 per sq ft at the leapfrogged suburban locations
- Impact on affordability will influence the price and absorption dynamics
- Sustainability to gain focus as the industry looks forward towards IGBC Green Homes standards
Outlook: Retail Real Estate
- More collaborative models such as revenue sharing to emerge in the sector
- Rents to remain stable except select prime locations
- Large number of malls slated to become operational
- Retailers would continue to expand beyond Tier I into Tier II and III cities
- More international retailers to venture into India
An Outlook on Real Estate Regulatory Policies in India
(This white paper is available on request. Please contact the India Media Centre)