Publication: Construction Week, 31 May 2021
2020 was a year that saw major changes, and 2021 is the year of living with those changes. Change became the “new normal” with the arrival of new imagination and digital transformation. It has now become abundantly clear that 2021 is not going to brush off the challenges of a pandemic-riddled economy, infact it is adapting to the “new normal” and the year has now poised itself in a phase where the world enters into a segment of real estate growth and investment.
A recovering economy
There are several questions raised as the economy is expected to rebound after the meteor of the pandemic struck the world. What permanent changes are we going to witness in the real estate market? Will the real estate market strike gold with the new growth cycle? Or will we return to the pre-pandemic growth rate? With the lockdown and travel restrictions slowly being lifted in various parts of the world, we are witnessing a revival of real estate and improvement in the income of the working class. Cross-border investments are fuelling up even though investors are still wary of the economy. Financial institutions have started offering low interest rates, and governments are offering monetary stimulus to bring broad investment for sustained market growth, and the real estate market is a significant beneficiary of the scheme.
Vaccination and real estate
Manufacturing and warehousing
The Indian market has firmly established itself as a harbinger of new opportunities, especially when it comes to manufacturing. Ever since the pandemic eased, the industrial and the warehousing sector has seen a growth trajectory that has been pushed by the rising demand in e-commerce. There is a demand for space that is gaining traction in e-commerce as there has been a behavioral shift of consumer preference during the lockdown.
The Growth of Data Centers
The Indian populace is looking for the rollout of the 5G technology and Internet of Things (IoT) which is going to drive the demand in a positive direction. The Indian DC industry is expected to add close to 700 MW of power supply during the 2020-2025 period, which directly converts into a real estate opportunity of 9.3 million square feet. This addition gives added advantage to Mumbai due to submarine cable landing stations as they will drive power supply and consumer demand for real estate. With data centers seeing rapid growth, we are going to see a sharp growth in digital adoption.
India currently has a capacity of 400 to 450 MW of data, but with the digital market growing, demand for co-location facilities is going to see an estimated growth of 20% in the next five years. Not to forget, India witnessed the second REIT (Real Estate Investment Trust) in June 2020, after the first launch in 2019, which cajoled the investors. With the success of the REITs, developers would not hesitate to list through REIT, and we could see more REITs in 2021.
However, 80% of the real estate sector is dedicated to the residential segment. Thanks to Covid, housing prices have been on a downward spiral. The prices have fallen by 16% in the top 8 cities, and with banks offering low-interest rates, the buying sentiment is strong. Post pandemic, we are likely to witness people opting for better houses to accommodate the “new normal.”
It is safe to say that real estate has adjusted well to the pandemic and has come out as a stronger opponent in the battered economy. As the virus remains among us, the growth of the real estate market will be directly linked to our economic recovery in the near future. A dose of ambivalence awaits us as we look forward to a changing scenario.