It’s been quite good a recovery for the real estate sector in H1 2022: Anshuman Magazine of CBRE

Its been quite good a recovery for the real estate sector, and despite the Omicron-induced infections, home sales and office space leasing numbers for the first three months ( Jan – Mar) are encouraging.

For instance, supply of new office space dipped 11 per cent y-o-y in these months to 9.4 million sq ft (msf), but leasing saw a 97 per cent rise to 11.4 msf.

Home sales jumped 13 per cent q-o-q and 40 per cent y-o-y to 70,000 units. High-end home sales were up too. New launches were up by 30 per cent y-o-y to 60,000 units. Mid-end and high-end offerings (43 per cent and 30 per cent of total) dominated.

Industrial and logistics sector saw a 19 per cent y-o-y growth to 6.5 msf.

In the industrial and logistics sector, requirements are expected to go up driven by 3PL and e-com, macro-economic recovery and rise in retail penetraton, so we anticipate the segment would touch anywhere around 35-37 msf.

On the other hand, pent up demand in office space absorption will be up and we see requirements for larger spaces and office designs being recalibrated accordingly. Large institutional players are going ahead with greenfield investments through joint ventures, partnerships, platforms, and brownfield investments via REITs will boost upcoming capacities.

In case of residential sales, despite many moving parts – like interest rate hikes, geo-political crises, inflation, input cost rise and so on - cities like Bengaluru, Hyderabad, Pune, Mumbai and Delhi – NCR will dominate launches as these are where the new jobs come up first.

In case of office leasing, 2019 was a rare good year with 60–63 msf of absorption taking place. If we take that out, the average annual absorption in India is around 33-35 msf annually. By end of this year (2022) or by 2023 we should breach those numbers.

Residential sales are already better than pre-Covid level numbers.

And industrial and logistics segment (warehousing) is a fairly new vertical with low base effect. So not exactly comparable numbers there.

People factored in the input cost rise and interest rate hikes so far have not impacted demand. By previous year standards, despite the recent increases, mortgage rates are still lower. However, the upcycle has started. What we need to see is where it ends and then determine the impact on demand.

Also, I do not foresee a scenario where home prices come down immediately in any market.

New launches are happening at a 5-8 per cent premium over previous quarters and if you notice, hikes are market and project specific. Micro-market specific trends will stay.

In residential sales, the concern over health has led to increased demand for health support systems coming up as a part of the project. This is over and above the regular amenities like clubbing, activity areas, green spaces and so on.

As hybrid work models evolve, people are now asking for larger homes, an upgrade in lifestyle is also happening.

On the work front, office designs are changing. Seating arrangements are now spaced out; air ventilation, air hygiene and air filtration systems are in focus.