5 trends that will reshape the Indian real estate market


Among the many different factors influencing the way real estate is developed, transacted and used in India, five major emerging trends are likely to have the biggest real-time and long-term impact

1. Co-working spaces finding favour with independent consultants, freelancers

With the growing start-up ecosystem across India and the central government creating an enabling environment for entrepreneurship, demand for office spaces matching such firms’ requirements has gone up, in the last few years. Also, due to the rising number of freelance professionals or consultants in today’s globalised workforce, office communities or co-working spaces are gaining popularity across Indian metros and tier-2 cities.

These spaces offer desks at cheaper rentals and some also allow a rent-free period to tenants, apart from utilities and an office-like feel to potential start-ups. Some of the co-working places, also work as incubation centres for the urban centres they are based out of. Interestingly, start-ups are also buying/ leasing real estate, to sub-lease it to such tenants. Roughly, over a 100 such players are already active across India.

2. Crowdfunding beginning to take hold

Crowdfunding involves raising small amounts of money online, from many people across the globe, to finance a project or venture. While other industries have seen the emergence of a more dynamic crowdfunding scene, real estate’s popularity still has a lot of catching up to do.

Although it is in a nascent stage in India, crowdfunding can pick up, because the financials of many developers are stretched. With increased digitisation and transparency, investors can be expected to open up to this way of investing, if they can expect good returns. Already, non-resident Indians can invest in the country’s real estate market, under the same conditions applicable to residents. Moreover, a marketplace is already bringing together real estate investors, as also listing premium plots, apartments and villas. This sector is likely to evolve and grow in the coming years.

 

3. Greater transparency to attract more funding

Two-thirds of the real estate markets, globally, have shown progress in their levels of transparency over the past two years, according to JLL’s Global Real Estate Transparency Index (GRETI) 2016. India also made improvements in overall transparency scores, by moving up four places and its tier-1 cities are expected to break into the transparent category in the 2018 rankings.

Out of 109 countries, the top 10 highly-transparent markets alone corner 75% of global investment into commercial real estate (CRE), highlighting the extent to which transparency drives real estate investment decisions. Capital allocations in excess of US $1 trillion, will be targeting CRE within the next decade, compared to US$700 billion now. This growth means investors will continue to demand further improvements in real estate transparency. There’s also mounting pressure from the world’s growing middle classes, to weed out corruption from real estate, while social media will also help to improve transparency.

 

4. Retailers looking favourably at office-retail complexes

For quite some time now, retailers have been roadblocked by a lack of available quality retail space. At such a time, office-retail complexes (ORCs) are emerging as alternatives to high streets and malls, for some categories of retailers, such as F&B (quick service restaurants, coffee shops, fine dining, pubs, etc.) or BFSI (bank branches, ATMs, broking services, etc.).

See also: Commercial and office demand determine residential realty trends

As most part of a working individual’s day, is spent at the office, retail services benefit immensely by locating themselves close to business districts. Retail categories, such as telecom services, office formals, leather bags and accessories, high-end fitness centres, premium salons, eyewear and mobile manufacturers, are now all looking favourably at ORCs.

Of the total retail presence in office buildings across major tier-1 cities, a dominant 26% is occupied by F&B and 23% is occupied by retail BFSI outlets. While retailers get the dual advantage, of paying lower rents compared to premium spaces in grade-A malls and closer access to their main target segment of office-goers, developers are also open to experimenting more with a mixed-use format. This way, they can build retail spaces on the lower floors and commercial spaces on the upper floors.

 

5. Technology is transforming real estate requirements across the globe

Tech-enabled workplaces are becoming more common across the globe. In the United States, research on the budgets of clients’ interior build-outs are showing very interesting results, with IT costs as a proportion of overall construction budgets increasing rapidly. Over the last decade, this cost was around 5% of the overall construction budget.

Now, IT services have expanded from mere cabling and wiring, to include access devices, infrastructure, mobility, connectivity, data security systems, wireless connections, business-specific apps, company-specific conferencing and presentation capabilities. All of these items can add up to 35% or more of the budget, for a truly technology-focused company.

This theme is seen in every tenant build-out today, from traditional law firms to new campuses built by companies like Facebook and Apple. The aesthetics and prestige of an office, are beginning to take a back seat to technology and connectivity.

(The writer is chairman and country head, JLL India)

 

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