Indian Real Estate Prepares for re-entry to the Next Normal Economy
News Desk, News Nation 360 : India’s real estate will experience a paradigm shift as the country re-enters the COVID-19 world and the national economy feels the impact of the pandemic. According to JLL, real estate occupiers and investors will receive some respite via the USD270 bn Government of India COVID-19 relief package but will need to reconsider pre-crisis priorities and accelerate new strategic initiatives to adapt to a “Next Normal” in the Indian economy. Impact on Office Market : The office market saw the net absorption fall by 30% i.e. to 8.6 million sq. ft. in Q1 2020, mirroring the moderation of quarterly economic growth to 3.1%. Expansion plans of many companies paused resulting from deferred deals, while real estate strategies shifted to re-negotiations of contracts and delaying fit-outs. “In the short-term, re-negotiation of contracts between landlords and occupiers is the underlying trend in the office real estate market,” says the report. However, according to top developers surveyed in the office sector, many are looking at Common Area Maintenance (CAM) charges discount or waivers. This has emerged as a significant trend where landlords/developers are either agreeing or reviewing the same with occupiers. Having said that, it is important to note here that there are no visible trends in favour of rental deferment / rental discount until now across the top seven cities. Impact on Residential Market : Due to the pandemic, homebuyers have deferred purchase decisions, resulting in a 30% sales decline in Q1 2020. In the short-term, developers will focus on restarting their construction activities and offloading unsold inventory. Impact on Capital Markets : While annual investments crossed USD 5 bn for the last three years, 2020 started on a weaker note, the time period between January to March 2020 saw a 58% decline in investments y-o-y, with transactions paused. A nationwide lockdown meant no face to face meetings, site visits, legal due diligence and financial closure, therefore leading to transactions coming to a standstill. Ramesh Nair, CEO and Country Head (India), JLL said that as it is adapted to and embrace the Next Normal world, there will be a greater emphasis on well-being, sustainability and business continuity planning across businesses within real estate. Real estate as an asset class is here to stay; however, it is inevitable to reinvent, to stay relevant in this new paradigm. It is indisputable that the pandemic induced disruption is changing the rules of the game, but also accelerating the increased adoption of technology and artificial intelligence (AI) in processes ranging from marketing and sales to loan modelling and data management.
Report : Anustup Kundu