Real Estate Trends Post Covid
Covid-19 was an unexpected storm that impacted all industries. Real Estate too was not spared. Add to it, Indian Real Estate was already going through transformative phases due to three major policy interruptions — demonetization (2016), the introduction of the Goods and Services Tax (2017), and the Real Estate regulatory authority (2016). After the initial shocks of these policy changes, Indian Real Estate was predicted to rebound and it did so till early 2020. However, the onset of Covid changed the entire landscape given everything was at a standstill. The market for commercial property, rental, or ownership all took a major hit in terms of both price and inventory.
In the hindsight, Covid-19 accelerated some of the medium-term transformations, that were largely expected to bring the Indian Real Estate level with global best practices. Right now, it is no longer a requirement of just space. Experienced or aspirational buyersand investors are looking beyond just square foot areas.
This requirement has thrown the spotlight on a few emerging trends in the Real Estate market, cherry-picking a few to give a perspective of investors and buyers of this asset class :
- Cautious approach by Institutional Investors: Since we are still grappling with new variants of Covid every other day, an unstable economy in US and Europe, inflation across countries, and the lingering war in Ukraine, institutional investors are cautious in their investment approach.According tothe FICCI-Vestianreport, Real Estate stood at $2.3 billion during the first half of the2022 (H1 2022) as against $3.2 billion of investment seen in H1 2021, depicting a decline of 28%. Commercial assets are still the most preferred with 60% of total investment. Increased investment in the commercial sector can largely be attributed to brisk return-to-office, a growing number of start-ups,expanding workforce, anda slow but steady momentum in the retail sector.
- Rise in demand for co-working spaces and equipped offices: The most important learning during the pandemic has been survival through adjustments. Demand for flexible office spaces has hit an all-time high. This is not limited to only start-ups but expands to major corporates too. The major reason behind this has been the shift in perspective of organizations regarding flexible working hours, travel time, and remaining closer to their employees. Another argument in favor of co-working space has been the lock-in period for taking up a regular office space, which is anywhere between 3-4 years. Validating this trend is the FICCI data on Real Estate Office Space absorption in the top 7 cities in January-June 2022. Out of the net absorption of approximately 20.8 million square feet of office space, the share of co-working spaces stood at 20% in H1 of 2022. It was just 6 % of net officespace during the same period in the year 2021.
- Accelerating Real Estate growth in Tier-2 cities: Tier-2 cities are raising the Real Estate ladder in terms of infrastructure, development, and connectivity, which is accentuated by the work-from-home requirementsduring the pandemic and continues post-pandemic. There is an urge to be close to one’s family and amp up savings given the cost of living in these cities is low compared to metros.Integrated township projects which are self-sustainable and green, with ample open spaces and good amenitiestop the list amongst buyers/ investors in Tier-2 cities. A realization has dawned on for value in buying homes with more space for a considerably lower premium than megacities. (Here we can include some graphs to help show a few tier-two cities which has been growing, I couldn’t find anything in the FICCI report)
- Increase in demand for home ownership vis-a-vis rental: Despite an inevitable economic slowdown due to Covid 19 and market uncertainty, the idea of homeownership is still going strong. During the pandemic, significant time has been spent indoors and thus people have started appreciating the concept of space and ownership. It is very difficult to make alterations in a rented property and there is no guarantee that evacuation shall not be asked for before the completion of the lease period. Larger apartments with thoughtful spaces which have corners that can be converted into home-office, integrated with a holistic ecosystem, with leisure and fitness amenities, are in demand. The pandemic has re-iterated the fact that if communities or condominiums are self-sufficient they not only take care of the needs for space but also of both physical and mental health. Therefore, the aspiration is to own space rather than to hop from one property to another as a tenant.
- Builder credibility and background checks: Given the Real Estate market in the past has been hit by numerous builders declaring bankruptcy, property buyers and investors have become very cautious while selecting projects. The trend at present is to do a background check on the builders, and the projects that are launched. Given that the government is also supporting consumer complaints and readily updating digital information on builders, property buyers have started taking out time to do background checks, by viewing the reviews and ratings of the projects launched by the builders, checking their CRISIL ratings, and reaching out to ROC (Registrar of Companies ) to ascertain their financial stability. In addition, property buyers have started to scan the performance of the builders through their turnaround time of project launch and handovers to ascertain credibility.
- Digitisation and integration of technology: Home tours, documentation, transactions, and capital allocation will all be dominated by digitization. The pandemic has shown that like all buying decisions home buying toocan be accentuated by digital integration. Technological advances in AR (Augmented reality) , VR (virtual reality), AI ( Artificial intelligence) are creating opportunities and improving experiences for property buyers/ investors. Virtual open houses, the launch of projects, bookings of properties, and AR tours of properties using apps, have kept the interest in the Real Estate market intact among buyers and investors. It is also commendable, how the government is supporting such digitization by making the process of documentation, and registration of properties easy for property buyers and investors. Overall we can say that the Real Estate market has been able to cope with all trials and tribulations, emerging due to Covid-19. In the process, the market has made some discoveries, of the changing consumer and investor mindset and adapted itself to better the standards of quality, service, and process involved in buying or investing in this asset class. If you are still in two minds, about whetherReal Estate should be a part of your asset portfolio, let us help you take an informed decision. Please visit us (company website)to help you understand our experience and contribution to the Real Estate sector and connect with us to help you with your customized needs for investing or owning a property.