Real estate offers safe investment options that are estimated to accelerate with economic stability in 2021
Where the world is limping to recover from the fracturing effect of novel Coronavirus, the otherwise vexing phenomenon proved to be a blessing in disguise for the real estate sector. The paradigm shift in the demand coupled with alteration in government policies is estimated to provide a conducive ecosystem for attracting investment in the real estate sector for the year 2021.
As the businesses resorted to remote working culture for an optimum solution to curb the escalation of the virus, the trend is there to stay for a while even after the vaccine is rolled out. This has deployed intensive pressure on the digital infrastructure to stay virtually connected. Not just the industries but institutions, as well as individuals, unanimously adopted the cloud storage mechanism.
Incidentally, the robust data consumption has also prioritised data protection which can be materialized through data localisation.
Owing to these demands 2020 saw investments for 14 data centres. It is indicative of the fact that there is an acute demand for data centres and cloud services in the country. The analysis by JLL India also estimates that by 2025 the data centre industry will increase its capacity by 703 MW which will create an opportunity worth 9.3 million sq. ft. for the real estate sector. There is a lucrative opportunity for real estate to venture into the data centre development business.
Moving ahead, the lockdown brought to surface the disruption in the supply chain. Moreover, the restriction in mobility filliped the dependence on E-commerce. The need for massive storage space for daily necessities, electronics, and FMCG sectors was realised during the period.
Likewise, the virus outbreak called for intensive pharmaceutical and cold chain storage laying great demand for the 3 PL, logistics, and E-commerce which further strengthened the necessity for warehouse property.
Additionally, India is on the path to make its presence felt globally as a manufacturing hub for which Grade A warehouses need to be set up beyond the realm of metro cities and enter tier 2 and 3 cities.
It can be perceived that real estate has a very integral role to play in the expansion of warehouses across the country. Moreover, amendments made to reduce the warehouse construction time from 6 months to 3.5 months are there to further leverage the real estate sector in full realization of its service.
The foreign investment has further strengthened India’s stance as investors have shown great interest in the quality asset in India, especially in 3PL, FMCG and pharma segments. This is strongly backed up by SEBI’s alteration in REITs rules that ensures lucrative return in commercial real estate guaranteeing the investment inflow.
As the majority must have witnessed work from home as a direct consequence of pandemic, it is estimated that the IT/ ITeS companies are not going to break free from the remote working culture in the near future or at least till the first quarter of next year.
As the primary concern of employees has shifted from space efficiency to hygiene, health, and social distancing, co-working spaces offer the ideal solution catering to work from home as well as work from office.
The co-working segment accounts for flexible spaces which brims with innovative offerings highly effective in curtailing the capital expenditure while enhancing cost savings. It furnishes a collaborative work culture that boosts the productivity of the employees.
Under the co-working spaces hub and spoke model is gaining popularity owing to its advantage over relaxation in commute time making it convenient and flexible enough to suit the employee demographics. According to JLL India report, by 2023 the country’s flexible space market is expected to cross 50 million sq. ft.
Where flexi spaces otherwise a suitable choice for start-ups and SMEs in the pre-COVID era are being adopted with alacrity by large corporates discerning the benefits it offers, the segment is estimated to grow by 15- 20 per cent per annum in the coming three to four years.
The co-working spaces will have a positive influence on the commercial real estate market in 2021 that will keep employee interest and dynamic work culture at the heart of its functioning.
The residential sector witnessed a paradoxical effect which experienced robust recovery even amidst the ongoing speculation around the ongoing pandemic. The pandemic has instilled the importance of quality life amongst the masses.
The need for spacious residential houses having a separate office space, gym corner, kids’ area has never been felt strongly before as during the virtual working culture. The government also played a crucial role in offering a conducive environment for encouraging home buying.
Home loans were reduced between 6.9 and 8.9 per cent by certain top banks and some states even extended stamp duty discounts for favouring purchasing in the housing sector.
Though 2020 was a rough year for all businesses, real estate saw around 85 per cent surge in sales in the Q3 as compared to Q2. Real estate has the potential to drive the overall economic growth of the country. It offers safe investment options that are estimated to accelerate as a result of economic stability in 2021 coupled with a politically stable environment.
The author is the Founder and CEO of Realty Assistant
DISCLAIMER: Views expressed are the authors' own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.