The year 2021 witnessed a staggering response in residential as well as commercial real estate in India. The market was already gaining traction as the need for residential apartments & plots grew post nation-wide lockdown, the property prices witnessed a surge in demand as well as prices per square feet. Apart from commercial areas that cater to residents’ daily or weekly requirements, the corporate world has begun to express interest in expanding operations, owing to improvements in connectivity and expected economic growth.
We may see additional liquidity poured into commercial real estate this year. The year 2022 will witness a rising demand for suitable workspaces, freehold commercial & residential properties, and new concepts that will maximise returns for investors.
According to Knight Frank’s 2022 Outlook Report, compared to the volatility of 2021 created by the second wave of Covid-19, the residential and commercial real estate sector in the country would have a more stable scenario in 2022.
It’s hard to believe that 2021 is over. But alas, here we are, and it’s fair to say that it’s been a challenging year for real estate. As we head into 2022, here are some trends that real estate investors should keep into consideration.
Rise in demand for Co-working spaces
In 2020, there was a considerable increase in office closures and a rapid shift to ubiquitous remote employment worldwide. This trend continued in 2021, However, as the vaccines rolled out, individuals gradually returned to workplaces. This pandemic has served as the ultimate litmus test for workplace digital transformation. Companies have had to invest in digital capabilities to allow employees to work from home. Businesses are investigating new working methods while keeping workplace flexibility at the forefront to ensure employee well-being and corporate profitability balance. The most noticeable development has been the growth of a hybrid workforce across a variety of workspace options, including flexible offices.
Due to the desire for worker flexibility and portfolio re-optimisation, flexible workspace operators expect to increase their portfolios in the next 2-3 years. Hub-and-space models, higher financial gains, an increase in the number of strategic partners, acquisition, demand-driven expansions, and a focus on technology, health, and safety are just a few of the primary drivers that will force the adapt-to-suit workplaces market forward.
SCO Shop-cum-office space is another avenue for monetisation
The revolutionary concept of a Shop-cum-Office (SCO) plot has been accepted by the State Government’s new planned colony policy. Under the scheme floated by the Haryana government, developers can sell plots where buyers can construct up to four floors and use them for office or retail purposes. The new era of commercial SCO plots is on the rise due to these rules. The SCO markets have been a remarkable success, with the capital of early investors multiplying many folds in a short span. Regular cash flows, longer leases, and a better income are just a few of the benefits that a wise investor can enjoy.
The capital appreciation and higher rental yields due to the marketplace’s integrated ecosystem are the decisive factors for informed investors with a long-term vision of investing in a product. When compared to malls, the advantages of this type of business establishment include enhanced ground coverage, leasable area exceeding saleable area, freehold property, multiplied rentals, and significantly reduced upkeep.
Sustainable & Environment-friendly Commercial & Residential Development
Environment, sustainability, and governance are expected to be a path to progress in the Indian real estate industry. Transparency and stakeholder interaction are now becoming increasingly important to investors seeking to make informed business investment decisions. Developers are now laying strong emphasis on LEED, IGBC, GRIHA& BEE certifications in construction leading to significant reduction in carbon footprints.
Increasing demand for free-hold property
The majority of commercial and industrial plots are leasehold, meaning they can only be occupied for a set time, usually 99 years in some states. In this instance, government bodies such as municipal corporations and Housing Boards have ownership rights. The owner of a freehold property, on the other hand, has complete control over the property. For a long time, the commercial and industrial community has demanded the right to own properties to promote expansion and borrowing. Industrial policies must be drafted to allow conversion of leasehold to freehold industrial plots to improve ease of doing business. The demand is already high, and 2022 will see more such properties being explored.
Increasing demand for Data centres
The tremendous digital push sparked by the COVID-19 pandemic has been profitable for data centres, which may still provide a 15% (approx.) annual rental yield. Companies began to remodel their digital infrastructure to meet with the new work environment immediately after India went into lockdown mode owing to COVID-19, resulting in a 25-35 per cent rise in data centre capacity consumption.
The Indian data centre market currently houses an estimated 445 MW of critical IT capacity and addition of 290 MW is expected in 2022 which would take the total count will to 735 MW by end of next year. Work-from-home (WFH) mandates, online education, video-based medical consultations, a huge surge in e-commerce, and business-related video conferencing and webinars are all driving up the demand for secured data centres. Furthermore, the government’s decision to make data localisation mandatory ensures that data centres have a bright future. Indeed, data centres are gaining traction as an alternative real estate asset class with enormous potential.
In the end, 2022 will witness a surge in SCO concept development. These SCO plots will help entrepreneurs advance their business ideas by owning a commercial space at reasonably placed rates with better amenities. Astute investors are increasingly catching on to the benefits of a well-equipped environment supporting retail or office in a favourable market. Mixed-use commercial spaces, without a doubt, will assist investors in diversifying their risk in the investment portfolio by capitalising on this new emerging concept.
Source : Financial Express