[ecis2016.org] Smart cities, co-working spaces, affordable housing and logistics and warehousing, are likely to be the key factors shaping the future of the real estate sector in India, says a report by CII-CBRE
The real estate sector, which witnessed decades of traditional approaches, will now be revolutionised by ‘disruptors’ that have initiated a new wind of demand in the sector, says a report titled ‘Real Estate – A Relook’, released by CII in association with its knowledge partner CBRE. The report, which was released at the CII CBRE Realty 2019 conference, listed smart cities, co-working spaces, affordable housing and logistics and warehousing as the key disruptors.
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While releasing the report, Anshuman Magazine, chairman – CII Realty 2019 and co-chair, CII National Committee on Housing and Real Estate and chairman and CEO – India, South-east Asia, Middle East and Africa, CBRE said, “In the wake of positive policy reforms, the emergence of a strong workforce, introduction of new technologies and growth of newer asset classes, the momentum of India’s realty sector is growing substantially. India has a one-of-a-kind growth story, with real estate as the country’s growth propeller.”
Addressing the conference, Hardeep Singh Puri, minister of state for Housing and Urban Affairs said, “Introduction of RERA has led to a truly revolutionary phase in the history of real estate. With the transparency, reforms and regulation that these new policies have brought to the sector, now is the time to enter into the new technology-driven approach, building green and eco-friendly homes.”
Co-chairman, CII Realty 2018 and chairman and managing director, ASF Group, Anil Saraf added: “The policy reforms that the government has introduced, has ushered in burgeoning new sectoral opportunities, adding greater transparency to the ecosystem. We are witnessing a significant business shift, from traditional housing to the emerging trends like co-working office spaces and start-ups. Today, large occupiers want a technology-driven office strategy, thus, encouraging the players to focus on the way technology is required to become part of our industry. Additionally, in order to reboot the housing segment, we need right sizing and right pricing approach.”
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Key real estate trends that will shape the future of Indian realty
- The growth of smart cities, will be one of the influencing factors that will shape the future of the country’s real estate environment.
- Infrastructure renewal in tier-2 and tier-3 cities, with widespread deployment of state-of-the-art surveillance systems and integrated intelligent traffic management systems, are expected to streamline basic amenities.
- Launch of ‘100 Smart Cities Mission’, where the focus is on sustainable and inclusive development through the use of ‘smart’ solutions.
- Development of townships as a result of new industrial corridors (under ‘Make in India’).
- By 2030, Delhi may overtake Tokyo as the world’s largest urban agglomeration. India will have 68 cities with a population of more than 1 million, up from 42 today.
- One of the primary factors that need to be adopted to witness this progress by 2030, is to strengthen inter-regional connectivity by developing an integrated transportation system.
- Focus should also be on expanding affordable housing and developing efficient neighborhood planning, along with driving sustainability in everyday life.
- With the recent wave of rapid expansion, flexible spaces account for about 1.7% of the total office stock in APAC, currently. Shanghai and Delhi-NCR were the only two markets in the region, where flexible spaces accounted for more than 3% of the overall office stock.
- Keeping pace with the demand, the overall stock of flexible space in the country (including the seven Indian cities) increased by almost 52% y-o-y to almost 20 million sq ft by H1 2019. In H1 2019, almost 30% of the flexible space leasing took place in Bengaluru.
- By 2020, leasing by flexible space operators is expected to touch 7-9 million.
- More established corporates to opt for flexible spaces and large-sized deal closures are expected.
- Flexible spaces unlikely to be limited to office buildings and ‘free-addressing’ policies to boost operator expansion.
- Flexible operators have been bullish about India and leased about 4.6 million sq ft of space in H1 2019, an increase of about 52% on a y-o-y basis. India today is one of the biggest flexible space markets in APAC, with a stock of almost 20 million sq ft and is only expected to grow from strength to strength.
- Housing demand remains concentrated in the affordable and mid-end segments.
- Projects launched in locations with basic physical and social infrastructure, are expected to see greater traction.
- Given the improving affordability of the population, definition of affordable housing and mid-end housing is expected to blur somewhat in the coming years, given the improving affordability of the population.
- In addition, the government also recently changed the definition of affordable housing, to
- 60 sq m in metropolitan cities (NCR including Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad), Bengaluru, Mumbai – MMR region, Chennai, Hyderabad and Kolkata) having value up to Rs 4.5 million and to 90 sq m in non-metropolitan cities / towns with value up to Rs 4.5 million.
Logistics and warehousing
- Leasing activity rose by almost 31% compared to H1 2018, crossing 13 million sq ft in H1 2019.
- The sector is also likely to attract significant investments – as indicated by the latest report (CBRE APAC Investor Intention Survey, 2019), India was among the top 5 investment destinations in APAC, depicting industrial and logistics as one of the top segments expected to be targeted by investors in 2019.
- Widespread deployment of IoT to create smarter warehouses, with improved supply chain efficiencies.
- Advent of bigger warehouses that are constructed at greater distances, not only from each other but also from residential districts.
- Partial crossover between warehousing and retail property expected; for instance, shopping centres in large US and European cities often have self-storage facilities, where buyers take delivery of goods ordered online.
Reinventing real estate through policy reforms
- At present, 30 states and union territories have notified the RERA rules, with more than 42,000 housing projects registered so far.
- In H1 2019, supply at a pan India level inched up by 17% y-o-y while sales grew by 16% y-o-y.
- Real estate in India is now high on the global investors’ radar, with the country’s first REIT listing a prominent example.
- India has witnessed rapid strides in its Ease of Doing Business ranking.
- For the first time, separate policies for individual real estate segments have been announced in H1 2019, including a Draft Logistics Policy, a Draft Industrial Policy, a Draft E-commerce Policy and a Draft Retail Policy.
- The impact of the implementation of RERA, GST and Insolvency and Bankruptcy Code is expected to better place developers with a scalable business model, to increase their market share in a regulatory environment that demands greater accountability and transparency from developers.
Impact of the advent of PropTech in India
- One of the prime sectors that will witness a revolution due to digitalization, is the realty sector – artificial intelligence, virtual and augmented reality, analytics, blockchain, autonomous vehicles and IoT, are the new disruptive and exponential technologies that will accelerate innovation and drive growth.
- As the operation dynamics of the real estate business in India are evolving and innovating at a pace much faster than envisioned, it is almost imperative that innovations be applied to the most basic, as well as most important step in the value chain – construction techniques.
- Tech in construction space has coincided with growing demand for faster construction and world-class quality. Therefore, developers would have to increasingly adopt newer construction techniques.
- Digitalisation will lead to the emergence of a new start-up initiative – PropTech, a technological innovation in data assembling, designing and transactions, by which it will provide efficient services to both, occupiers and landlords/developers.
Building a ‘future ready’ talent
- Going forward, an increasing number of freelance individuals, small groups and partner businesses will work ‘with’ organisations, instead of ‘for’ organisations
- There will be an increase in the demand of flexible spaces, as workplaces are becoming more modern, keeping with the aspirations of the millennial working population. With a steady growth in mobile population, this sector will fast change gears and become ‘mainstream’.
- Corporates may provide a diverse range of amenities and value-add services, such as cafés, shuttle services, etc.
- Deploying tech solutions (such as cloud-based apps) for jobs such as booking conference rooms or reporting faults, to increase.
- So will leveraging labour analytics, to obtain robust and evidence-based solutions, to find the right talent.
According to Sunil Kant Munjal, past president of CII and chairman of Hero Enterprise: “It is the right time for introspection and making the necessary changes, to the dynamics of the real estate sector. There is a need to demonstrate that we deliver more than we promise and this will require a concentrated effort from all the players in the system. The sector demands a paradigm shift, which is possible only through technology that will act as a game-changer and help realty to revive, opening new opportunities for growth in India. Additionally, we need to recognise the emerging trends across smart cities, co-working spaces, affordable housing etc. We need to believe that this is the best opportunity for the sector to make a shift to a customer-centric industry.”
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