Commercial Realty To Boom

The Indian Commercial Real Estate (CRE) sector has shown resilience throughout the pandemic. The lockdown and work-from-home trend led to a drop in demand for office space. But, with unlock, the demand for commercial and office space has recovered steadily. Like a roof over one’s head, a business requires a formal office set-up where employees can meet, brainstorm ideas. Face-to-face meetings cannot be replaced by virtual-meetings forever. Businesses are slowly asking their employees to work from the office as per the local rules, safety, and precautionary measures.

Stage set for high growth in CRE

With unlocking, the reform measures undertaken by the government, low asset, and easy liquidity, which has been the primary reason for the positive change in sentiment. Companies have realized that work from home can be a transient phase at best, it cannot replace the office space. The pandemic has also been an eye-opener with the aspect of space allotted per employee in an office setup. With companies now seeking to expand their offices, to keep up with the social distancing norm to work through the virus as a mass vaccine program would take several months to be fully implemented in a country with a vast population that also faces a myriad of socio-economic challenges.

Leading the demand

Moving into 2021, demands from the IT/ITeS and retail sector, start-ups for office spaces are expected to witness growth in terms of absorption as well as rental revenue, with developers opting for a more sustainable land development strategy. With economic activities picking up, the demand for small and medium retail space from the MSME segment will witness a rise, warehousing as a segment was little to least affected throughout the pandemic. Malls and retail outlets with robust design and structure, multiple entries and exit points, modern amenities for safety and security will see traction. India’s digital march has led to a need for a robust ecosystem of data centres in the country, where the industry still hasn’t developed to its full potential. With India’s growing online presence, 2021 will witness an increase in data centre investors, occupiers, and solution providers, expanding their footprint in India.

Reform measures

The reform measures announced by the government, especially the stamp duty cut effective till March 2021 will continue to act as a stimulus for demand. The change in tax laws to allow different pricing of agreement value up to 20 per cent from the circle value will encourage developers to clear their unsold inventory where the prices have softened, demand is low. The low rates and easy liquidity, and a likely cut in construction premium and other levies by the Maharashtra state government is likely to boost business sentiment further. The government's call to businesses to set up facilities in India, offering PLI schemes to help become a self-reliant economy will provide a boost to the economy, leading to investment flowing in from overseas.

The new year 2021 will see the emergence of many prominent commercial micro-markets, satellite offices as the existing CBDs get overcrowded and costly. The focus will be to deliver an exponential experience to tenants with wellness at the forefront. If the year 2020 was about recovery, 2021 will be all about growth.

The author is the CEO of Azlo Realty