Office, Logistics & Warehousing and Student Housing; Sunrise Sectors of Indian Realty in 2020: JLL & FICCI Report

JLL & FICCI (Federation of Indian Chamber of Commerce & Industry) India’s largest real estate services firm today released a report titled ‘Future of India Real Estate: Deciphering the Mid-term Perspective‘ at the 12th edition of FICCI Real Estate Summit. The report, co-authored by JLL & FICCI, analyses the drivers and challenges facing the sector in the next 2 to 3 years.

India’s recovery from the effects of demonetization and GST is reflected in 1Q2018 GDP clocking an impressive 8.2% growth. CPI inflation, which has been a concern in the recent past, is expected to remain at 4.7% in the annual forecast for median inflation (2018-19 and 2019-20).

Promising market outlook
Sectors                                    Current status                Future outlook
                                                                         To surpass 700 mn sq ft by                                                               
Office (Grade A)                           530 mn sq ft                  2022
                                                                         To surpass 100 mn sq ft by
Retail (Grade A)                           77 mn sq ft                   2022
Residential (Sales)                        96,000 units in 2017          1,30,000 units in 2018 E
Logistics & Warehousing*                   138.5 mn sq ft (2015-2017)    252.7 mn sq ft (2018-2020 E)
Student Housing*                           INR 1,267 cr                  INR 2,400 cr by (2020 E)

Apart from the macro-economic indicators, inflection points observed within each category of real estate markets indicate an overall stable growth in the medium term.

*Logistics & Warehousing: The figures indicate total Grade A and B Warehouse Stock

*Student Housing: Calculations based on No. of Beds at an average annual fees of INR 1,50,000.

Ramesh Nair, CEO & Country Head, JLL India said, “India’s real estate sector is at an inflection point and the evolutionary trends in the sector are paving the way towards sustainable growth of the industry. H1 2018 has seen phenomenal growth in Grade A office space from both, the demand and supply side. Private Equity interest in Indian retail realty is at an all-time high with the sector witnessing an investment of INR 950 cr in 2018. With regulatory reforms such as RERA and GST showing results, the sector is poised to grow exponentially. Student Housing, a new emerging sector presents a tremendous opportunity for the market.”

Sanjay Dutt, Chairman FICCI Real Estate Committee said, “The sector has been through a bumpy ride in the last couple of years, but the environment is changing and the sector is back in the spotlight with key indicators pointing at the revival of Indian real estate. Key regulatory reforms such as RERA and REITs have given a new lease to the sector, and investors and end users are regaining confidence towards the recovery trends in the industry. Logistics & warehousing, commercial & retail are witnessing surge in demand and absorption. Overall trends are moving in the right direction for the Indian real estate sector.”

Office Market: Steady Growth and Stable Vacancy Rate

Suburban sub-markets playing role; contributing more to office activity
Co-working has almost doubled to 9% in H1 2018 over CY 2017
Bengaluru is likely to see the highest absorption during 2018-2020; absorption rate in Mumbai to surpass supply during the same period
NCR, Bengaluru and Hyderabad will contribute more than 60% to total in 2018-2022

Retail: Predictive analytics to aid future growth

As of 1H18, India’s Grade A completed stock in the retail segment stood at 77 million sq and is expected to reach nearly 103 million sq ft by 2022
Delhi-NCR likely to witness absorption during 2018-2020; closely followed by Hyderabad
Absorption levels in Mumbai and Kolkata to surpass the supply during 2018-2020
Mumbai to lead rental growth trends; with other markets rise

Residential: Affordable Housing Holds the Key

The number of new launches crossed the mark for the 1s time after eight quarters in Q2 2018
Bengaluru & Mumbai remain the contributors to new residential launches
< > within the INR 40 lacs pricing bracket were the highest during 2017 and H1 2018
Affordable housing finance is estimated to burgeon into an INR 6 lac cr. business opportunity by 2022

Logistics & Warehousing: The Evolutionary Leap Forward

India to witness investments of close to INR 50,000 cr. for the creation of warehousing facilities across country between 2018 and 2020
The sector is expected to grow at a CAGR of 22.2% in the period 2018 to 2020
Large infrastructure projects like DFC, DMIC, Sagarmala Bharatmala to drive of the sector
< > cumulative stock of 138.5 mn sq ft was recorded in 2017 for Grade A and Grade B across eight primary locations
Student has the potential to yield more than 12% returns vis-a-vis the core commercial sector in which returns remain range bound between 7% & 10%

This sector is expected to grow at a 38% CAGR until 2020, to INR 2,400 cr.
The is still at a nascent stage with the top 15 players dominating the organized space; cumulatively operating around 84,500 beds and plan to grow to 1,60,000 beds by 2020
The extent to which the real estate sector has grown can be gauged from investments in ‘under construction’ projects within investment grade real estate. This number which was about USD 173.9 billion in Q4 2012, has touched USD 242.6 billion in Q2 2018. India has moved up 30 ranks to the 100th position on the World Bank’s scale of countries in Ease of Doing Business for 2018.

Overall, strong economic fundamentals, proactive reforms and the use of technology will continue to boost the sector. Apart from the conventional sectors, the emergence of alternative segment (student housing and senior living) and greater demand from sophisticated logistics in the warehousing space are expected to be the drivers for robust growth and a promising future for the sector.

The development was reported by

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