It’s too early to forecast how the world’s going to unfold when the pandemic ends, as end it must, although the timing’s uncertain. Will we toss aside our masks and stride forth, as we once did, to movies, malls and restaurants and partake of all the pre-pandemic pleasures that cities had to offer?

Will we go back to offices? Or, will we permanently abandon the sprawling, crowded megalopolises and work from hill stations or smaller towns where rents are lower, the air’s cleaner and life moves at a slower pace? Also, now that we’ve all learnt to order online, will that lead to the demise of bricks-and-mortar retailers and with them the high street and malls?

The answer is people will do all of these things — the unknown is to what degree. And therein lies the predicament for India’s real estate barons for whom the future remains deeply problematic and potentially painful.

Real estate developers were already in watch-and-wait mode before the onset of Covid-19 over the housing market which had stalled with too many new homes up for sale. Commercial office real-estate, by contrast, had been one bright spot, moving along at a brisk pace, driven partly by the software services industry.

Then, there have been the malls. Since the pandemic put paid to shopping expeditions and restaurants were forced to shut for months on end, the growth figures came crashing down in 2020. Only five malls came up and not the 54 that had been expected, according to Anarock Property Consultants.

The fact is that we shouldn’t expect the real-estate industry to come roaring back to life in the immediate future. In 2021, and possibly further into the future, there’ll be too many uncertainties about the way the post-pandemic world will unfold.

Let’s look at commercial real estate, which had been faring well till 2020. All the real-estate consultancies agree office space absorption fell by around 50 per cent in 2020. Savills reckons 55.7 million-sq-ft of office space was leased out in 2019 in the top six metros and that plunged to around 27.4 million-sq-ft in 2020.

Is that likely to recover quickly in the coming year or two? The guess is no. We’ve all discovered that technology makes it possible to work at least partly from home. Most corporate czars and real-estate experts predict we will soon move to a hybrid-work model, with fewer hours spent in office. So corporations may hang on to their offices, but they probably won’t be looking at expansion in the near future.

In recent years, the software services and hi-tech industries have been expanding at a furious pace and, as a result, Bengaluru’s real-estate market was outpacing other cities. It’s hard to say if that will continue because the software services industry has discovered WFH is completely feasible without client confidentiality being breached. Many of the country’s top software services companies are still largely in WFH mode. So even though the software services companies are expecting extremely healthy revenue growth, it’s highly unlikely to result in them snapping up huge swathes of new real-estate.

Infosys Chief Operating Officer Pravin Rao says in a six-month period during the pandemic, he only went twice to Infosys’ Bengaluru headquarters and, instead, ran the software services giant’s global operations from home. “At Infosys, we’ve been working from home 99 per cent. If you’d asked me a year back, I wouldn’t have thought it possible,” he says.

Will other growth industries emerge to take the place of the hi-tech giants? JLL (Jones Lang LaSalle) reckons there’ll be strong growth in the IT sector and e-commerce, FMCG and healthcare and that will ensure sufficient demand for office space. But that’s also subject to how much such companies embrace WFH.

The middle path

There is, of course, the Middle Path that many companies expect to follow. This could be mini-offices in different parts of a city, giving employees the chance of an office atmosphere but also a shortened commute.

This is what’s driving co-working, one real-estate sector that’s managed growth in a very tough year. Amit Ramani, CEO, Awfis, says his co-working company now has 25 per cent more seats on offer than it had pre-Covid. Ramani says the market, which had gone into a deep freeze, began moving once again to pre-Covid levels around September/October. He reckons Awfis now has 6,000-7,000 seats more than it did pre-Covid and he’s hoping to add another 5,000 by year-end. Says Ramani: “Local MNCs, midsize corporates, SMEs and freelancers all want to come back to office.”

Awfis has about 10 offices in each major metro but Ramani’s also crucially opening offices in smaller cities like Ahmedabad, Jaipur and Kochi. He’s just signed Indore and expects it to start functioning in the near future. “There are two phenomenons here,” he says. “Some people don’t want to come back. But tier-2 cities are also getting their moment in the sun.” He adds: “We have survived and have come out stronger.”

The housing market, too, has witnessed changes in priorities, say real-estate consultants. Stuck in their homes for months on end, people have realised it’s crucial to own your own home and it must have a working area from where it’s possible to conduct Zoom meetings and talk freely on the phone. In addition, since daily commuting may be a thing of the past, people are looking at moving away from city centres to more distant areas where prices are lower.

E-commerce is one sector that has done incredibly well during the pandemic and has soared to levels it wasn’t expecting to touch till 2024-25. The growth of e-commerce has also resulted in a huge logistics boom — the companies that transport goods from the factory to the e-commerce warehouse and from there to your doorstep. Savills predicts that warehousing space will increase by a huge 83 per cent in 2021.

Then, there are data centres that are sprouting around the country, driven by the government’s policy on data localisation. But building both warehouses and data centres is a specialised game and isn’t for the average real-estate company. All these factors mean there’s a shakeup looming that could lead to many casualties and new players.

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