Real estate revival to be slow; set for consolidation, says CBRE

The country’s real estate market is set for a slow recovery but the long-term prospects remain extremely positive, says Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE.

In an exclusive interaction with BusinessLine, Magazine said, “The sector will see some consolidation, structural changes, and the office segment will continue to be in demand with more global corporations outsourcing work to India in the post-Covid-19 scenario.”

“Real estate recovery will be slow, starting with low-cost housing, followed by affordable housing, given the government’s assurances of financial support leading to liquidity. The demand for housing in tier III and IV cities and smaller towns will also play a role,” he said.

“We also foresee office spaces and home designs going in for some changes post-Covid19. And in the case of homes, designers would factor separate spaces for work from home,” he said.

“The office market revival holds promise. In the last four years, 180 million sq ft of office space was absorbed. Last year alone, about 60 million sq ft was taken up. As we look ahead, office demand will continue to be there, even though there are concerns of social distancing due to Covid-19. However, the retail segment will be much slower to take off. But the demand from the logistics sector, data centres and warehouses will remain strong,” he said.

“The Covid-19 situation is still evolving. The real estate industry in 2019 recorded a 27 per cent increase in investment with fund inflow of $6 billion. In the last few years, the sector has also witnessed immense growth i the residential and commercial space take-up, with demand coming in from both domestic as well as foreign players,” he said.

Investment strategy

Given the current global situation, decisions on investments might get affected. During the current situation, developers are likely to stay cautious about project development and timelines. The real estate sector will revive and recover if companies start focusing on a reassessment of their expansion strategy for the next 12 months.

“Technology will play a big role in building contingency plans and providing data-driven decision-making. We believe, a number of global corporations will step up outsourcing and India will gain in terms of office/commercial real estate,” he said.

“Over the years, the country’s realty market has shown immense resilience. With the government’s support and announcement of several measures and economic relief packages, this trend will continue. The government and central bank have announced several measures to combat the economic crisis arising out of the Covid-19 breakout. Providing liquidity at both supply and demand sides is crucial,” he said.

“The decision to defer instalments of all term loans by three months was also announced to provide the necessary support to home buyers as well. To further ease flow of funds to the housing sector, the National Housing Bank (NHB) has also been provided with a refinance facility of 10,000 crore for housing finance companies (HFCs) as additional liquidity which should further boost the housing sector,” he said.

“Once the Covid-19 situation is contained, we expect demand to pick up, with investors across commercial and residential segments expanding their footprint in the market. In addition to this, the RBI has also introduced a series of measures to inject liquidity into the banking system, preserve financial stability and ultimately support growth. Providing for moratorium to all term loans is an important step to help investors and developers manage their working capital in these difficult times,” he explained.

“Following the introduction of some landmark policy decisions such as RERA, GST and demonetisation, the real estate industry was already undergoing the process of restructuring. These measures created favourable ground for serious players with right intentions and financial strength and led to M&A and consolidation activities across major markets,” he said.