Real estate in India is all set to bounce back with a bang in 2022. We expect the positive uptrend that was visible in 2021 to continue in 2022.
Requirements in the residential and commercial sectors were put on hold for almost two years owing to the pandemic. The pent-up demand is being realized now, leading to a surge in the real estate sector, and the momentum is expected to hold through the year. This is amply evident from the plethora of projects announced by real estate developers like Central Park, Signature Global, Whiteland corporation, etc.
Residential
The real estate sector in India is set to experience around 5% capital value growth in the residential sector in 2022. A surge in raw materials prices has pushed up the input prices leading to an increase in real estate prices by up to Rs 400 – Rs 600 per sq ft. This negative effect, though, maybe offset by the favorable monetary policies of the Indian government, like the historically low loan rates and temporary stamp cuts. Also, the sales momentum built up so far indicates that even in 2022, prospective homebuyers will continue to look for bigger homes with better amenities. The combination of pricing systems adopted by the developers and government policies will ensure the trends keep going in 2022. The luxury housing segment is looking very positive this year.
Another aspect of the residential sector is the retirement and second home segment. With the rise of work from home and work from anywhere culture, there has been a change in how we view our homes. Houses have gone from being just a bed to sleep on after work to being multifaceted spaces that facilitate the dual roles of work and relaxation. This is why there has been an increase in the number of people looking for second homes or more expansive spaces wherein they could retire eventually.
Commercial
The commercial real estate segment is not far behind in building growth. The key segments to note are data centers, flexible workspaces, coworking spaces, and warehousing and logistics.
The advent of the pandemic saw an extreme change in the way we did things in the country. The digitalization process occurred across the board on all services, even those previously reluctant to accept technological changes. The exponential increase in digital consumption means a higher demand for data centers. As a result, we can expect to see many data center projects coming up this year. Data center infrastructure company Equinix has announced plans to invest over USD 9 million to acquire around 5.5-acre land parcels in Chennai on a long-term lease. This is just a preview of the scale of developments expected this year.
The Indian government has also stepped forward, having realized this growth potential, and recently announced that data centers would have infrastructure status. India is now well-positioned to grow as one of South Asia’s most important data center hubs.
With almost the entire working population forced to work from home over the past three years, conventional office spaces have lost their demand. As companies realize that work can take place equally well over a virtual workspace, flexible workspaces and coworking spaces have grown popular. The increase in demand is evident from the move by providers like IndiQube and SpazeOne to extend their portfolios to Tier-II cities as well this year. As a result, we would see an increasing number of coworking spaces across locations in the country.
Another aspect of digitalization was seen in the number of e-commerce businesses during the pandemic. Even those businesses that preferred brick-and-mortar stores were forced to go online with their offerings. As a result, warehousing and logistics became an increasing necessity. Entities like Horizon industrial park logistics, Indospace, and WOLP have expanded their warehousing and logistical facilities to cater to this upswing.
This is not to say that the commercial retail space sector has lost out on the way. Evolving to the changing times’ spaces like shopping malls have stopped focusing on just shopping and have shifted focus to a more engaging experience for the visitors, thereby changing the kind of services offered in commercial spaces. A case in point is the entertainment centers that have become more prevalent in shopping malls. While previously entertainment at malls primarily consisted of cinema theatres, nowadays we see inhouse games and recreational activities booming. With plans from retail majors like Lulu and developers like DLF to develop more shopping malls across the country, this sector will rise to new heights this year.
Real estate is the third largest sector bringing about economic growth, and it is expected to continue its upward trajectory in 2022. Indian real estate will account for 13 percent of India’s GDP by 2025. Learning from the previous Covid waves, the real estate sector has prepared itself for any future pandemic onslaughts by digitalizing itself, ensuring that the business will continue as usual even if there is a lockdown.
Therefore, it is safe to say that prospects are good for real estate in 2022.