Real estate in India poised to take off in 2021

Updated: December 15, 2020 6:29 PM

With India having entered the unlock phase and an encouraging response seen in real estate during the festive season, one can surely be optimistic about the sector's growth prospects in 2021.

The COVID-19 pandemic has accelerated the trend of digitization in real estate to boost efficiency and enhance the customer experience.

Over the past few years, the real estate sector has witnessed a rapid evolution in the policy landscape in India. Consistent government initiatives laid the groundwork for transparency and facilitated ease of doing business in the past few years. The year 2020 began on a positive note, but a global lockdown, together with disrupted supply chains, temporarily frayed hopes.

However, with India having entered the unlock phase and an encouraging response seen in real estate during the festive season, one can surely be optimistic about the sector’s growth prospects in 2021. A report by Colliers India has highlighted the commercial space absorption shot up to 58% for the quarter ended September 30th, 2020. This development is a good indicator of improved consumer confidence and growth. It is likely to sustain the retail segment for now while boosting the demand for commercial real estate in the long term.

While India is witnessing a wave of COVID-19 cases, the plummeting of the positivity rate to below 5% has inspired confidence. Most Indian corporates have returned to office, while international corporates seem to have adopted a ‘wait and watch’ approach.

Moreover, in June this year, the Securities Exchange Board of India declassified the status of a sponsor for REIT and InvIT. This move is likely to restore investor confidence in a sector that had slowed down in the face of unintended consequences of the lockdown.

Following the SEBI’s amendment of the rules of REITs, one can expect an inflow of investment in commercial real estate that guarantees stable and lucrative returns, as compared to alternative segments. India is among the fastest-growing economies. Moreover, many NRIs are eyeing India for real estate investment amid the pandemic that has accelerated the sense of insecurity. Real estate has traditionally been considered a safe investment and continues to dominate the preference of investors. This trend of continued investment in the real estate sector is likely to accelerate further in the wake of a politically stable environment, rapid urbanization and expectation of economic stability in 2021.

The overall hygiene and wellness concerns imply that consumers are more likely to have confidence in organized developers with sound credentials. The COVID-19 pandemic has accelerated the trend of digitization in real estate to boost efficiency and enhance the customer experience. In the retail space, we foresee trends such as video shopping, omnichannel delivery and high-street retail to gain currency. The retail spaces built on the ‘under one roof’ concept with integrated facilities for shopping, food and entertainment will be the norm.

We also expect a tectonic shift in commercial and retail spaces investment. Savills India predicts an uptick of 42% in the leasing activity by co-working spaces in 2021. With global companies inching towards the option of flexible working, one can expect a robust demand for co-working spaces. Our iconic projects, Elan Mercado and Elan Town Centre, are too ready for possession and we will see globally renowned brands opening their retail stores here.

A combination of the conducive policy landscape, re-opening of workplaces, restored consumer confidence and increasing interest from international investors augur well for commercial real estate to embark on a growth trajectory in 2021.

(By Ravish Kapoor, Managing Director, Elan Group)

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