2020 was a year of significant change in the real estate sector, and 2021 will be a year of adjusting to those changes. With the arrival of new imagination and digital transformation, change became the “new normal.” It is now abundantly clear that 2021 will not brush aside the challenges of a pandemic-riddled economy; rather, the year is adapting to the “new normal,” and the world is entering a phase of real estate growth and investment.
A recovering economy
Several questions have been raised as the economy is expected to recover following the pandemic’s meteoric impact on the world. What long-term changes are we likely to see in the real estate market? Will the new growth cycle bring gold to the real estate market? Or will we return to pre-pandemic levels of growth? With the lifting of travel and lockdown restrictions throughout the world, real estate has revived and working-class income has increased. Even though investors are still wary of the economy, cross-border investments are increasing. Financial institutions have begun to offer low interest rates, and governments have begun to offer monetary stimulus to encourage broad investment for long-term market growth, with the real estate market benefiting significantly from the scheme.
Vaccination and real estate
The vaccine rollout is a major event that everyone is looking forward to. The vaccination drive will alleviate the public’s fear of the virus, ushering in a new cycle of market growth in 2021. The growth in areas such as IT, FMCG, e-commerce, and healthcare should be comparable to that of net absorption. Even though the Indian market remains volatile until the end of the year, the underlying strength of the Indian market as an outsourcing destination will see new demand for office space. As the market recovers, a new retail model should be developed that capitalizes on growth.
Manufacturing and warehousing
The Indian market has firmly established itself as a forerunner of new opportunities, particularly in manufacturing. Since the pandemic’s end, the industrial and warehousing sectors have been on a growth trajectory, fueled by rising e-commerce demand. E-commerce is gaining traction due to a behavioral shift in consumer preference during the lockdown.
In addition to e-commerce’s expected longevity, the logistics and cold chain industries are growing, driving demand for real estate. While we anticipated recovery in the economy in the fourth quarter of 2020, newer trends are emerging as there is an increased demand for manufacturing spaces that reduce hassles and build an omnichannel base.
The Growth of Data Centers
The Indian population is anticipating the rollout of 5G technology and the Internet of Things (IoT), which will drive demand in a positive direction. The Indian DC industry is expected to add nearly 700 MW of power supply between 2020 and 2025, translating into a 9.3 million square foot real estate opportunity. This addition provides an additional benefit to Mumbai because submarine cable landing stations will drive power supply and consumer demand for Real Estate Sector. With the rapid expansion of data centers, we can expect a surge in digital adoption.
With the digital market expanding in India, demand for co-location facilities will increase by 20% over the next five years. India will also launch its second REIT (Real Estate Investment Trust) in June 2020 following the successful launch in 2019. Developers may be less hesitant to list via REIT in 2021 due to the success of REITs.
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However, the residential segment accounts for 80% of the real estate sector. Housing prices have been falling as a result of Covid. Prices in the top eight cities have dropped by 16%, and with banks offering low-interest rates, buyer sentiment is high. People are likely to opt for better houses after the pandemic to accommodate the “new normal.”
With the economic downturn, real estate has proven to be a more deadly assassin than ever before. As long as the virus is present, our economic recovery will be highly dependent on the global real estate market. As we anticipate a changing scenario, we can expect a dose of ambivalence.