Trends that will reshape the real estate market
There are many different factors which will be influencing the way real estate is developed & purchased in India, there are five big major trends that have both real-time and long-term significance for the industry:
1. With the growing startup trend across India and the government creating a nurturing environment for startups,the demand for office spaces has gone up in the last few years. Also, due to the rising number of freelance professionals or consultants in today’s globalised labor pool, office communities or co-working spaces are gaining popularity. Co-working spaces are popping up everywhere around Indian metros as well as tier-II cities and are helping many startups get flexible working options at prices which they can afford. These buildings offer desks at cheaper rentals and some also allow a rent-free period to tenants apart from utilities. Some of the co-working places also work as incubation centres for the urban centres they are based out of. Interestingly, startups buying/ leasing real estate to sublease it to such tenants is also on the rise. At a rough estimate, over a 100 of such firms are already active in India. This trend is slowly and surely catching up in India.
2. Crowdfunding starting to take hold in India.
Crowdfunding helps innovators and inventors raise capital for catapulting their products or services through the Internet. Crowdfunding involves raising small amounts of money online crowdfunding websites like Kickstarter.com, croudfunding.com & indigogo.com, to finance a project or venture. While other companies have seen the emergence of a more dynamic funding scene, real estate’s popularity still has a lot of catching up to do. Some of the experts have pointed at the growing crowdfunding scene in the USA, where the amount of money raised and size of deals, as well as the rate at which they occur, have all steadily increased. In China, the real estate industry is no longer the privileged preserve of only the big investors, and property developers have turned to crowdfunding to help finance the building of commercial and residential projects. Although in nascent stages in India, crowdfunding can pick up here as well because the budgeting of many developers is stretched. With increased digitalisation and transparency, capitalists can be expected to open up to this way of investing if they see good returns. This sector is likely to evolve and grow in the coming years.
3. Transparency & clarity has to increase in order to help attract more fundings.
Two-thirds of the real estate markets across the globe have shown progress in their levels of transparency & clarity over the past years, according to JLL’s Global Real Estate Transparency indicant(GRETI) 2016. India too has made major improvements in the overall transparency scores by moving up four places, and its tier-I cities are expected to break into the transparent section in the 2018 rankings. Out of 109 countries, the top 10 highly-transparent markets alone fork 75% of global contribution into commercial real estate (CRE), displaying the extent to which transparency drives real estate investment opinion. At a time when fund allocations to real estate are growing all across the globe, investors are expecting transparency & clarity standards in Indian real estate to be at par with other asset classes.
4. Merchants looking favourably at office-retail complexes.
For quite some time now, retailers have been road blocked by a lack of accessible & quality retail spaces. At such a time, office-retail complexes (ORCs) are emerging as alternatives to high streets, and even malls, for some categories of retailers such as F&B (quick service restaurants, coffee shops, fine dining, pubs, etc.) or BFSI (bank branches, ATMs, broking services, etc.). Since most part of the day of a working individual is spent at the office during weekdays, retail services benefit immensely by locating themselves close to, or within, business precincts. Retail categories such as telecom services, office formals, leather bags and accessories, high-end fitness centres, premium salons, eyewear and mobile manufacturers are now all looking favourably at ORCs.
5. Technology is changing the real estate requirements all across the globe. Tech-enabled enterprises are becoming more common across the globe. In the USA, research on the budgets of clients’ interior build-outs is showing fascinating results, with IT costs as a proportion of overall construction budgets increasing swiftly. Earlier, they were around 5% of the overall building budgets over the last decade. More recent build-out budgets show the expansion of IT services from cabling and wiring to more than a dozen items for technology, along with access devices, infrastructure, mobility, connectivity, data security systems, wireless connections and enhancements, business-specific apps, company-specific conferencing and presentation capabilities. All of these items can add up to 35% or more of a cost for a truly technology-focused company. This theme is seen in every tenant build-out today, from conventional law firms to new campuses built by companies like Facebook and Apple. The aesthetics and dignity of an office, which were formerly the primary considerations, are beginning to take a back seat to the technology and the connectivity within the complex. Some corporate occupiers in India are starting to invest more in the expansion of their IT infrastructure.
According to our research, these are the 5 major trends which are going to reshape the real estate market in India.