While it is true that the pandemic-led disruptions over the last couple of years gave a solid boost to bigger and more spacious, luxurious home-buying across India, but that does not necessarily mean that the Affordable Homes’ segment must take the beating due to this short-term trend, says Siraj Saiyed, Director, Arete Group.

In an exclusive interview with Sanjeev Sinha, Mr Siraj talks about the latest trends in the real estate sector and how different segments are performing post-pandemic. Excerpts:

We witnessed a shift in demand towards bigger homes post the pandemic. Do you believe this trend will impact affordable housing?

No, don’t think so. While it is true that the pandemic-led disruptions over the last couple of years gave a solid boost to bigger and more spacious, luxurious home-buying across India, but that does not necessarily mean that the Affordable Homes’ segment – primarily consisting buyers from the lower-income groups having specific budget constraints – must take the beating due to this short-term trend. Neither does it imply that the demand for quality Affordable Homes in our country has been shrinking nor that it would be far-gone anytime in the near future!

Rather in the post-pandemic era, with offices now reopening in full swing, we may soon witness that owning smaller to mid-sized and affordable residential spaces situated nearer to an individual’s workplace location would obviously be prioritized by so many working professionals; and thus this segment is expected to gain decent traction especially in urban India at least. In fact, we believe that over the long term, both the Affordable and High-End Residential Real Estate segments of the nation shall continue to grow simultaneously and contribute immensely towards fortifying India’s burgeoning economy.

Also Read: HOME LOAN REFINANCE: Four reasons to opt for loan transfer

What is the significance of the Union Budget for Affordable Housing & Infra Development?

The Union Budget 2023 came across as a fairly balanced and progressive one aimed towards the nation’s continued socio-economic growth story. Notably, in this year’s Budget, the Centre announced 66 per cent increase in terms of the fund allocation for PM Awas Yojana, which is bound to act as a major boost for the nation’s Affordable Housing sector, and towards fulfilling the Government’s vision of ‘Housing For All’. Furthermore, with the introduction of a new tax regime in the Budget allowing exemption of income tax of upto INR 7 lakh, it means people from low or middle income strata would now have access to higher disposable incomes, which in turn enables them to easily go ahead with their affordable house purchase decisions in the longer run. On the other hand, the Budget also proposed significant capex increase in the infrastructure sector and setting up of an Urban Infrastructure Development Fund – both of which come as great news for India’s Infra Development space. These initiatives, as and when implemented, will play an instrumental role in further bolstering last-mile and multi-modal transit options across India, as well as in unlocking the latent potential of our vast hinterlands for catering to the nation’s future Real Estate and Infrastructure Developmental requirements.

How do you see the sector’s growth in tier 2 and 3 cities?

Gone are the times when a significant portion of the nation’s growth and infrastructure development was majorly concentrated in and around Indian metro cities, while smaller towns and cities lagged behind. Of late, India’s tier 2 and 3 cities as well have started moving up the curve rapidly and are witnessing unprecedented growth across multiple parameters – economic, financial, living standards, more job opportunities and higher disposable incomes, etc. And in sync, we have been seeing a phenomenal growth rate of real estate arising from the tier 2 and tier 3 cities of India, especially after the remote work culture was mainstreamed by the pandemic.

That being said, the sectoral growth in and from tier 2, tier 3 India is also being driven by various other factors such as Government initiatives to boost Affordable Housing and multi-modal connectivity, systematic investments from the public and private sectors, comparatively lower cost of land and labour, among others. Going forward, we strongly feel tier 2 and tier 3 regions shall continue to play an increasingly important role in terms of accelerating demand for both commercial and residential real estate in India.

The industrial & logistics (I&L) sector and warehousing are showing resilience with the resurgence of their leasing activity in recent times. How do you see the prospects?

Post-pandemic, the bouncing-back and growth spurt of the industrial and logistics sector and warehousing activities such as leasing and others across the country have happened on account of several factors. However, among the key reasons fuelling the same are – prioritization by our Government towards modern infrastructure development that comes along with evolution and rapid pace of industrialization nationwide, facilitation of smoother and faster logistics and transportation thereby leading to upliftment of local industries and industrial zones, and the ongoing e-commerce boom in India majorly driving commercial and warehousing demand.

By and large, the prospects and outlook of the I&L sector in India are expected to remain optimistic and exponential growth-oriented in the upcoming months and years as well, while the demand and need for domestic manufacturing and commercial real estate also continues to increase in parallel. At the same time, we will also see the rise of technology proliferation, automation and innovative approaches in the warehousing and allied commercial sectors – the ripple effect of which will revolutionize and transform the conventional ways of I&L sector and also pave the way towards Industry 4.0 of the future.

Which segment in the realty industry, according to you, is better for investment in the current scenario?

While there are several economic uncertainties at the global levels currently. In comparison, India is doing much better. Three major structural factors are driving the growth and development in India that will last for long-term; these include: 1. India’s growing internal consumption as well as our relatively faster-growing large economy. 2. Globally companies are now attempting to mitigate the risk of single region supply, especially overdependence on China. 3. The Indian Government’s visionary initiatives to support industrial growth through supportive policy and initiatives. These enabling factors collectively are having a direct positive impact on certain industries like warehousing, logistics, cold storage, pharma, chemicals, textile, and electronics, among others. These segments clearly have a lot of tailwind and immense scope of growth in the years to come; and therefore, these may be considered and potential investment choices from the business profitability perspective. It is worth noting here that though each of these segments bear their own challenges which need to overcome, but with Government initiatives and innovative solution, India is ready to capitalize growth in these areas.

On the other hand, in the current scenario, some of the prudent real estate investments options in 2023 would include – investing in completed (fully-constructed) and ready-to-move-in residential projects in developing or well-developed tier 2 cities, investing in multiple reputable properties through REITs, and B2B investments in industrial parks. However, one must always bear in mind that real estate is in most cases an immovable asset and a not-so-liquid one as well, and that careful planning is required to gain best returns despite the volatility of some of these assets.