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Published on: March 7, 2022, 3:42 p.m.
Real disruption in real estate
  • While the commercial office space market is undergoing structural changes following Covid-related changes, the market is now on a revival path; Photos: Sanjay Borade

By Arbind Gupta. Assistant Editor, Business India

Having undergone a strong revival in the last two quarters or so, the domestic residential market is heading for one of its best phases in the next few years when the market is likely to move in a more robust manner. In fact, the whole of 2020 and 2021 together can easily be termed as one of the defining periods for the Indian real estate sector, which has not only shown a great deal of resilience but also made a smart comeback, with home buyers extending strong support to the overall demand.

The pandemic has redefined the market in a big way, as buyers are all eager to buy their own homes. However, these buyers are now more discerning as also selective in choosing the developers they want to be associated with and this has further expedited the whole consolidation process. Large developers and corporate ones are increasing their pie in a big way, even as some of the small players with good track record of timely delivery and quality construction are looking to ramp up their presence in the market.

However, while the industry is gearing up to serve this buoyant scenario with new launches and services, the recent increase in input costs following considerable increase in commodity prices, may have some inflationary pressure on future pricing of properties. 

“The residential market has turned around dramatically in the last few months,” says Amber Maheshwari, CEO, Indiabulls Asset Management Co. “None of us had expected such a recovery, as we all were thinking of survival in Covid-afflicted market. More so, this has happened after 5-6 years of downturn. In all likelihood, this buoyancy will be sustained for the next 4-5 years. Importantly, the market looks more matured this time round, even as other macro and micro economic fundamental are quite robust”.

“Covid-19 stood out as a big real estate disruptor and accelerated housing demand conversion,” says Parikshit D. Kandpal, CFA, HDFC Securities. “Some of the catalysts that fuelled this are stamp duty cuts, developer discounts, high attrition and resultant hikes, democratization of ESOPs to cover a broader employee spectrum, achievement of accelerated unicorn status and stock market rally. All-time low mortgage rates and all-time high affordability have provided the supporting environment. We perceive inflation as a key risk since it may drive input cost and mortgage rates higher and derail the recovery. We still believe that developers have headroom to absorb inflation as greater transparency over time has reduced costs of capital and organised developers enjoy 25-30 per cent lower funding costs than tier-2 players,” Kandpal adds.

“The domestic real estate market has undergone a big transition,” oberves Gitamber Anand, co-chairman, FICCI Real Estate Commiittee and CMD, ATS Infra. “In fact, last few months have been quite remarkable for the industry from both supply and demand side. All the stakeholders are looking to work in an increasingly collaborative manner today and that is something will impart a more sustainable growth, going forward. While the buyers are more discerning, we as an industry will have to perform in a more responsible way”. 

Real estate activity in India’s leading housing markets intensified towards the second half of 2021, after a grim 18 months in which the economy was consistently battered by multiple waves of the pandemic. According to the latest report by, the leading online real estate brokerage company, home sales in India’s eight prime housing markets increased 13 per cent in 2021, when compared to the overall sales in 2020. Builders sold 205,936 housing units for the full year 2021, as against 182,639 units in 2020. The figures include the sales numbers for all the four quarters in both calendar years.

A much sharper growth was seen in terms of new supply in 2021 as against 2020 -- a total of 214,000 units were launched in 2021, compared to 122,000 units in the preceding year, showcasing an upward swing of 75 per cent. This improvement in key growth metrics for the sector, the second-largest employment generator in India after agriculture, could largely be attributed to support measures launched by the government in the aftermath of the corona-virus pandemic, improved consumer sentiment, stable prices and historically high housing affordability, says the report.

  • Global investors have shown an increased inclination towards investment in Indian real estate buoyed by regulatory reforms

“Beyond the numbers which speak for themselves, what is remarkable is the resilience of the real estate market in India,” says Dhruv Agarwala, group CEO,, & “Despite multiple waves of the pandemic, which resulted in multiple lockdowns, the residential real estate market has not only bounced back but is also on the cusp of a cyclical upturn. With policy support from the government and the low interest rate regime maintained by the RBI, I am confident about the sector, entering into 2022”.

“Developers have been quick to respond to the positive changes in buyer sentiment, as evidenced by the offers available in the market, especially during the festive season of 2021, which resulted in improved metrics for both, demand and supply,” says Rajan Sood, business head, “On the basis of the data available with us, it seems likely that we will see an increase in prices in 2022, even as the inventory overhang continues to decline in 2022. The biggest trend we foresee is that the real estate market will continue to consolidate its growth in 2022 as well”.


The process of consolidation further picked up pace during 2021, with home buyers increasingly preferring to deal with large and reputed developers. In a visible consolidation mode, the sector now has large players commanding a significant share in overall housing sales. Nearly one-third of the overall residential area today is sold by large listed and unlisted players and experts are of the view that going forward, developers with adequate financial muscle, brand name, execution track record and corporate governance will expand their share further in the market.

“With our unparalleled execution track record, balanced portfolio across segments and geographies and deep management expertise, we are uniquely positioned to capture opportunities for growth and gain from the accelerated consolidation that is taking place in the real estate industry,” says Irfan Razack, chairman & managing director, Prestige group. “It is an exciting time for the brand, with new launches and markets to support the ambitious growth plans we have set for ourselves, thanks to the relentless dedication of our employees across cities. We look forward to continuing to expand our footprint in high growth opportunity markets”. 

“After 5-6 years of slowdown, the industry is heading for a favourable condition,” says Mohit Malhotra, managing director & CEO, Godrej Properties. “As developers, we are all prepared to leverage these opportunities in a consolidating market place. We are scaling up our capabilities in most of the geographies we are present”.

The Mumbai-based developer with presence in multiple cities has firmed up plans to invest over Rs7,500 crore in the next 12-18 months. During the first nine months of 2021-22, the company has clocked sales bookings of Rs4,613 crore – up 13 per cent from the year-ago period. The realtor is all set to achieve its highest quarterly sales bookings during January-March 2022, beating previous record of Rs2,632 crore, on the back of launch of around 10 new projects.

While corporate and large developers are looking to gain out the changing market scenario and will increase its market share, experts are of the view that smaller developers (particularly with sound credential and capabilities and those who can adapt to the market condition) will continue to play their role. “No doubt, many of these small players are facing challenges in this fast-evolving market place, but I don’t think they will be out of the business in hurry,” feels M.R. Jaishankar, CMD, Brigade group. “The market is quite big and is expanding across a larger geography and we will continue to need them to meet this growing demand”. The Bengaluru-based realty firm’s sales bookings have increased by 14 per cent to about Rs1,995 crore in the first nine months of the current fiscal, mainly on the back of revival in housing demand.

  • The office sector holds the frontline of foreign investments with 43 per cent share in total foreign investments

While the commercial office space market is also undergoing structural changes following Covid-related changes, the market is now on a revival path. According to JLL, the Indian office sector saw net absorption of 11.56 million sq ft in October-December 2021, the highest in the last eight quarters, and up by 86 per cent quarter-on-quarter. Net absorption was up 26 per cent year-on-year for the half-yearly period of July-December 2021.

With physical offices here to stay, portfolio optimisation and hybrid working are expected to be the dominant themes, going forward, driven by incremental demand from IT/ITeS firms and the rebound of flexible office operators. The recovery in the office sector and flight-to-quality trend is expected to keep rents stable to increasing in 2022.

Transactions for warehousing segment, riding on the boom of the e-commerce sector, is projected to grow at a CAGR of 20 per cent from 31.7 million sq ft in 2020-21 to 45.9 million sq ft in 2022-23. The e-commerce share in total transactions is projected to increase to 36 per cent from 31 per cent during this period. The Indian Data Centre market will continue to grow at a brisk pace. 

Global investors

Meanwhile, foreign investors have continued to bet big on the Indian market. During 2017-21, the foreign capital flows in real estate jumped three times to $24 billion over the preceding five-year period, says the Colliers Report: Foreign investments in Indian real estate turn a corner, released in association with FICCI. Over the last five years, global investors have shown an increased inclination towards investment in Indian real estate buoyed by regulatory reforms introduced in 2016.

During 2017-21, alternative assets saw an inflow of about $1 billion, with a majority of it coming during the pandemic years. Government policy for data localisation and infrastructure status received for data centres recently are likely to give a boost to the establishment of new data centres in the country.

“In the last few years, the Indian real estate market has undergone a transition,” assesses Chanakya Chakravarti, managing director India, Growth Markets, Ivanhoe Cambridge, a global real estate investor. “The market is more organised following a series of policy measures led by RERA. Foreign investors are finding themselves in a more comfortable space than before. Office will continue to drive the foreign investments going forward”

Sharad Mittal, ED & CEO, Motilal Oswal RE Investment Advisors believes that, going forward, real estate across sectors will see a sustainable volume-led growth, on the back of consolidation. Institutional investors are closely looking at the developments the market is undertaking. “The last five years have been quite disruptive,” adds Mittal. “There are plenty of opportunities available. However, it remains to be seen how both supply and demand side evolve going ahead”.

“The Indian real estate market looks quite attractive today,” says Balaji Rao, managing partner, real estate, Axis AMC. “Opportunities are available in smaller cities also, but that will be in a new version. We are bullish across all sectors. In fact, the next 4-5 years will be quite interesting for the Indian real estate market”.

Foreign investors, who had previously refrained from investing in the Indian real estate market due to the lack of transparency, started investing in the country with greater optimism from 2017. The share of foreign investments in Indian real estate has grown to 82 per cent during 2017-2021, compared to 37 per cent in the preceding five-year period.

“We are witnessing buoyancy in global capital inflows in India across asset classes, with office and industrial assets remaining the most preferred,” says Piyush Gupta, managing director, Capital Markets and Investment Services, Colliers India. “Investors take a long-term view with significant exposure on development assets, reflecting confidence to take construction risks with credible Partners. Investors continue to invest with developers with proven expertise in respective business areas to build and acquire long-term sustainable assets. With residential sales continuing to do well across markets in India and available opportunities to grow for developers, more structured capital is likely to flow into the sector”.

During 2017-21, according to the Colliers’ report, the office sector holds the frontline of foreign investments with 43 per cent share in total foreign investments, followed by mixed-use sector, accounting for 18 per cent share in total foreign investments. Investments in the industrial and logistics sector stand at position three surpassing the residential sector.

Foreign investors remained cautious about the residential sector in the aftermath of the NBFC crisis and subdued residential sales. The share of residential assets in total foreign investments has reduced to 11 per cent in 2017-21, from 37 per cent in the preceding five-year period.

  • With physical offices here to stay, portfolio optimisation and hybrid working are expected to be the dominant themes

New platforms

“Demand for alternative assets including life science labs, data centres, flex spaces has grown during the pandemic as investors seek new avenues for growth and returns,” informs Vimal Nadar, senior director, research, Colliers. “Data centres garnered a maximum share of 52 per cent of foreign investments in alternatives in last five years.

Lack of income producing data centre assets in key locations and scope for future REIT listings will push investors to form new platforms for development opportunities. In the past five years, capital commitments equating $13.5 billion have been made by global data centre operators, corporates, and investors for the development of data centres in India”.

Momentum in industrial and logistics assets in India has picked up only in the last five years, driven by robust demand from e-commerce and 3PL firms for modern warehousing facilities. However, in 2021, industrial and logistics assets emerged as the top choice for foreign institutional investors, garnering almost a third of foreign investments ($1.1 billion) surpassing the office sector. Lack of ready grade A industrial and logistics parks across tier I and II locations amid high demand scenario has pushed investors to create platforms for the development of modern warehousing facilities in these locations, says the report.

With all these developments in place, the Indian real estate market looks to be sitting on a much stronger pedestal today. In the last few years which include two difficult years of the pandemic phase, the industry has witnessed multiple challenges. But this has proved quite disruptive for the market which is looking to undergo its next transformation phase. As the industry looks more organised and transparent, the more of formal and institutional money will get into this market leading to its robust and sustainable growth phase in coming years.

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