Future of Commercial Real Estate in India

India’s commercial real estate (CRE) market has grown stronger in the past few years or so. With the rise of real estate developers, there has been strong user interest and the institutional capital stake has proven to be a catalyst for development in CRE. The sector has received strong interest from various sectors such as technology, banking, financial services, etc. With the increase in coworking spaces and the development of flexible spaces, there is a sustained annual growth in office absorption.

Indians have always invested in gold and real estate. Previously, real estate investment was limited to the residential periphery. Now as the times change, investing in the industry is pushing the boundaries. The future of this commercial real estate industry will be influenced by the following factors:

Real estate fund (REIT)

The Real Estate Investment Trust (REIT), a globally known instrument, was introduced a few years ago in India to arouse interest in real estate through the development of rental income. With the start of the REITs, the commercial sector, in contrast to the residential real estate sector, saw better capital growth. The arrangement of REITs is not only an incredible protection for funders, but also a benefit for the developers. For developers, it could open up the value of their business assets. You can think of REITs as an exit vehicle, with an amazingly tempting capitalization rate, and then reduce your substantial debt.

Reject in Covid cases:

With the start of this pandemic, the real estate industry is, among other things, the industry that has been hardest hit. It envisaged the closure of the offices and thus a reduction in the demand for commercial real estate. Now that the situation is normalizing somewhat and the government is easing restrictions, office space is steadily opening up.

Recreation in the metropolises:

The real estate industry is picking up in stages. Even more so in the cities, which can be seen in their high speed and varied way of life. Be that as it may, Tier 2 and Tier 3 urban communities are also expected to drive recovery and development. Reasons for this are the normalization of the distribution of work and work from anywhere models by companies and customers alike.

Rise of coworking spaces:

Coworking spaces will play an important role in the future of the industry. The workforce is dispersed and we have learned over the past year to live together from anywhere within a company. Accordingly, a JLL report predicts India’s co-working market is likely to exceed 50 million square feet by 2023. It is further said that adaptable office space is expected to develop normally at around 15-20% per year over the next three to four years, even if this path will not be straightforward.

Commercial real estate is picking up speed. India’s net office space absorption was 4.39 million square feet in the second quarter, up 32% year-over-year in major cities, according to the JLL Report. Due to the smooth framework conditions, the future of commercial real estate looks promising.

The author of this article is Ms. Asma Javed, VP-Leasing, Retail & Commercial, Supertech Ltd

The views and opinions expressed are not from IIFL Securities, indiainfoline.com