The Indian real estate sector has witnessed some unprecedented times in the past few years. It has both disrupted the predications as well as brought optimism with new reforms being implemented. Rapidly evolving trends & technology is redefining how real-estate business will be conducted and managed in India.
Disruptions and Innovations are a part of parcel of the post Covid era. Due to the movement back to home, safety net of the family, a roof and steady income, higher impact of political decision making has led to emerging trends in the demographic, psychographic, economics, geopolitical and many other trends thus resulting to the “new normal”.
The Corona Effect
As we have all learned in 2020 & 2021, life can be very unpredictable. Normal life has been flipped on its head and has tested everyone, whether ultra-rich, HNIs, CXOs, middle level executives, workers, Businessmen, shopkeepers & workers including migrants. One of the effects on real estate has been the reduced demand of commercial/office space, due to the work from home culture and the necessity of social distancing. Technology has advanced to enable everyone to be connected, be it at their desk in an office or sitting at their kitchen table or bed room or in comfort of Home office. In this challenging time, many folks are seeing the benefits and efficiency of zero commute time, a more efficient workforce, lower facility cost, more time to spend with their family etc.
While right now it seems like a short-term reaction to the pandemic, this is a trend that will unlikely to die soon. Some major companies have already started to permanently get rid of their office space and move to remote working arrangements. Most Technology Companies in Silicon Valley are in the process of permanently shifting most of employees towards remote working and flexible workplace layouts until we get over pandemic time. So, seems like office space is expecting a change when the existing tenant leases come up for renewal. Leading to more office vacancies, and rental rates stagnating and, in some cases, declining.
As for retail segment, digital technology will have an effect on the brick and mortar sales which in turn led to the large amount of tenant defaults, bankruptcies and downsizings that were consequence to the government-mandated closure in the form of lockdowns & curfews. So, this opens up avenues for many retailers who never thought a certain center or location was in their budget, but now are in the position to negotiate as desperate landlords would be looking to fill vacated space. The resultant would be that there would be vacant retail spaces, and rental rates will be stagnant.
We present few ideas that could become new trend in time to come.
New avenues in Commercial Real Estate
There will still be some demand for flexible office space and industrial spaces as there are supply chain constraints due to the ongoing “Trade War” with China. This may not necessarily be true for USA. But this would have a trickle effect on increased demand for assets related to supply chain operations like fulfillment centers, cold and dry storage for online ordering and more. The conclusion is that the industrial, storage and fulfillment facilities demand will grow, and rental rates will escalate.
With respect to Housing, the current economic forces have had an impact on the incomes, livelihood, and savings of many citizens especially for the middle class. So it appears that many of them in this population will continue to be in rental accommodations for the foreseeable future. The prognosis is that the demand for rental apartment will remain high, and due to the effects of Covid-19, rental rates will remain flat, until clarity is reached for future employment outlooks.
One learning we had from Covid-19 is that when it comes to the residential sector, people have learned that their home (whether flat in an Apartment or standalone) matters a lot. Being stuck for months in the house has led people to questioning their current living conditions. This had led to the shift away from offices, designated workspaces in residences will be more important. Since people would be spending more time inside the home, they are now looking for larger residential units with private office space as well as study units for their children.
Compact Apartments in Central Business Districts (CBD)
Studio Apartments are a western concept and not quite popular in India. However they have their own merits as the studio apartment is a single room with an open kitchenette and a separate bathroom whereas in the case of 1BHK apartment (Flat) has a separate bedroom, a living room and a kitchen with separate bathroom. In the metros, affordability of living spaces closer to work place, especially for youngsters starting their career gives a boost to the demand. Even blue collar professionals (including working couple) are also choosing homes closer to work place during working days and return back to their home during weekends. This saves them travelling time and the conveyance cost.
Need for more Public outdoor spaces
Another underlying impact of Covid-19 is that people have learnt the importance of good health and need for exercising. This had led to preference for Parks and other outdoor places in the vicinity. Access to outdoor amenities will feature more prominently in the future of real estate, be it for private communities or urban planning, commercial spaces or mass housing. While Covid-19 is temporary, its effect on the world, and impact on real estate, will be felt for very long time.
Increased Demand in Residential Real Estate due to Population Growth
Data shows that the world population will be 9.8 million in 2050 from the current 7.8 billion. India and other emerging markets are going to be the key economies in this population’s growth. With this increase it will also lead to increase in demand for living space. Also the middle class will rise by almost double (about 180% from 2020 to 2050). By 2025, emerging markets will host 60% of global construction activity. This means that for the coming 2-3 decades emerging markets like India will have pent up demand in residential retail space.
Co-living or Shared Living
Co-living, Co-Working is a very millennial concept. And it has its merits, viz. it creates a cost-effective environment for likeminded people to live and work. People rent individual rooms, but share common areas such as a kitchen, living room, recreation area and outdoor space, thus reducing the expenses and the stress of setting up the place. Another favourable aspect of the “co-living” is the social opportunity of meeting and living with others with similar interests, attitude and networking opportunities.
There was a sudden demand for “co-living” before Covid-19 but post- covid this trend may see a marked change. With increased vaccinations and economies going back to old days with the technological advancements, this demand could escalate.
Weekend Home, Farm Houses
As the name suggests, it is a kind of property in an agricultural setting, which is used for residential purposes. There has been an upward trend among urban HNI investors, to own vacation homes with lots of greenery and agricultural opportunities. Tired of the concrete jungles in the urban areas and increased internet connectivity, the demand for such housing options has increased and people have actively started to look for Weekend Home in remote areas.
Embrace the change – be an early adopter, don’t live in the past
The pandemic has taught us a lot and Adaptability to the changing scenarios has been a key learning, The Post Covid times, Real Estate will see major changes. It wouldn’t be a smooth ride, nor the good old days, there will be some difficulties, and, many new opportunities too. The key for the coming times is to embrace the change and adopt it quickly. New innovations, lifestyle changes will happen at an even faster rate, and if you do not adjust fast enough, you will miss the bus! So, seize the opportunity and create a better future for yourself!
Trends in Real Estate Industry
Tech companies and Real Estate Sector
There is an ongoing noise that with work from home, commercial real estate would be on the decline. If that is the case then the global tech players like Google, Apple, Amazon, and Facebook (GAAF) who redefine work, shopping, mobility, leisure and every way of how we live, aren’t selling away their real estates. They are holding on it, which means that commercial real estate is here to stay.
Green replaces the grey jungle
With more environmental issues and growing awareness amongst people, the real estate creations of a concrete grey jungle will make room for environment friendly installations. Bringing nature into the concrete grey jungle has its own environmental as well as health benefits.
Real estate Investing with a Social Conscious
In Manufacturing sector large investors only invest in project which are environmental conscious or ESG (Environmental, social and governance) compliant. Similar trend will emerge in the Real Estate Sector in a short span of time. So employing child labour or pregnant workers for better cost, these companies will have to relook at their business models.
The Real Estate Experience
Holding on to your first home until death is now an alien concept. With co-sharing on an upward trend positive user experience will be the game changer and will lead to higher stickiness.
Real Estate Brokers & Telemarketers and technological disruption.
With the onslaught of Artificial intelligence researchers at Oxford University, predict to affect these jobs to a large extent, between 97%- 99%.
New consumer = new real estate business
With young preferring co-sharing and higher mobility to the new ageing population looking at secured gated communities with facilities, the old way of real estate wouldn’t work. With the growing needs and demands based on the consumer personality, a new demographic is emerging that requires real estate to also evolve.
Migration and urbanisation
With the Covid pandemic diminishing the urban and rural lines, with work from home and technology at door step, migration or back to home is emerging. But the rural centers are under developed and unequipped to the new demand of real estate in these areas. The real estate sector can develop new “social housing” that’s a win-win for all.
Location, Does it still hold the power?
With near lockdowns, work from home concept, people moving back to home towns, and growing online businesses, the need for office space is already changing dramatically. Location which until now was the premium factor that would bulk up a majority of the real estate cost, has lost its sheen. However, there is a silver lining, i.e. there is a tremendous potential to use space more effectively.