Despite the unprecedented economic challenges brought by the pandemic, India’s real estate market has shown incredible resilience, states a report by Knight Frank international consultants. The prime markets like NCR, Mumbai indicate stable trends, while Bengaluru is likely to experience a surge in demand.
Various sectors, like the residential and commercial market, specialist sectors like the student housing sector, have shown excellent resistance to the downtrends. Among them, the Bengaluru office market was thought to be the hardest hit but has emerged successfully.
Bengaluru Commercial Real Estate Office Market Overview
With the onset of lockdown due to the pandemic, the offices have been deserted for several months in a row leading to emptying them. The falling economies made the landlords prioritize the occupancy than the rents.
With the lack of activity, office rents across the Asia Pacific region fell by 4% year-on-year in 2020, which is in-line with Knight Frank’s expectation of -5% to -3% growth. The easing restrictions have de-stressed the office market. The Bengaluru Commercial Real Estate market is likely to see a surge in office rents the following year as it has existing low vacancies that will help them withstand the supply shock.
Impact on Other Real Estate Market Sectors
Bengaluru office market is all set to experience a surge, and it is not alone. Other sectors have equally exhibited resilience. Let’s get through the analysis of each industry.
Though Bengaluru has seen a fall in transaction activity volume in March, it remained stable during May and July. Many have indeed expected a cease in the housing business transactions due to the pandemic’s countermeasures adopted nationally. Adding fuel to the fire was the economic conditions where the nation was heading towards a recession. High job insecurity was cited as the reason for estimating a drastic falling market.
Nevertheless, the easing restrictions have seen a pent-up demand that sparked the need, making the market’s outlook stable. According to the APAC outlook report by Knight Frank, the pick-up in the housing transaction volume activity has been observed in October. Similar market trends have been observed for Delhi and Mumbai.
With the home loan rates at the lowest decade and are expected to go on for a year ahead, the price growth is anticipated to be moderate and equivalent to the 2020 trends.
The inclination to e-commerce due to the emphasis on the social distancing norms and mobility restriction has flared the demand for industrial, commercial properties like warehouses and data centers.
The demand for warehouses has exhibited resilience as it has seen a fall of only 11% year-on-year compared to the 44% CAGR from 2017 to 2020. It was due to the limited supply of grade A warehouses in Bengaluru and Hyderabad. The unavailability of high-class warehousing facilities has stifled the industry to find more spaces as it is crucial to deliver on-time in online retail activity.
This susceptible growth is believed to be permanent due to the rising work from home or work from anywhere culture. The months from March to May of 2020 experienced weakening market conditions for the reasons known to each one of us. But the demand started to rise from July and continue the stable trends.
Student Housing Sector
Specialist sectors like Student housing and senior living are evolving asset class investments. India’s student population stands at an enormous 34 million undergraduates currently enrolled in universities across major cities.
The student population is expected to grow further as the government targets 30% of the 18 to 23-year-olds to enroll in the undergraduate program. This ambition is sparked in the government minds to upskill the labor force.
India’s student housing sector is in the nascent stage, with Bengaluru standing atop, with the highest universities and colleges, i.e., 961, followed by Pune – 819, Hyderabad – 615, Jaipur – 574, and Nagpur – 410. The student housing sector has a vast space unexplored with the deficient supply in the market. This particular sector demands good amenities and infrastructures like WIFI, laundry service, and enhanced security. With the lack of high-grade student housing units in major cities, the demand probably increases.
While COVID-19 remains a constraint, the ongoing vaccine trials and their development sounds like a ray of hope, even though we have a far way to go. As the international borders open and resume their travel activities, the business transactions would improve slowly.
The year 2020 has been shadowed by the pandemic. Nevertheless, the government measures reducing the stamp duties, Model Tenancy Law to boost the residential sector. These have helped the industry gain momentum, which is expected to stabilize the prime markets like Bengaluru, Mumbai, and NCR.
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Real Estate Market 2021 FAQ's:
The residential sector has seen a surge in the demand that has been accumulated due to the halt brought by the pandemic. The low home loan rates are also increasing demand, making it positive all over.
Commercial properties like warehouses and data centers are high in demand. The office rents have also been stable, making them a viable option for investment.
Yes. The student population is estimated to be around 34 million in India, and Bengaluru has the highest. The student housing sector is in the developing stage and has a long way to go.
The student housing sector and senior living can see a positive surge in 2021.