After a tumultuous two years marred by the Covid-19 pandemic, the Indian economy is showing signs of recovery. Most economic indicators have either breached pre-pandemic levels or reached close to those levels. The country's central bank is projecting GDP growth of 9.5% for Financial Year (FY) 2022, and this upsurge in economic activity is expected to benefit the real estate sector, particularly in residential, office, warehousing, and data centers.
Residential Market on a Strong Foot
After a prolonged period of falling and then stabilizing, residential prices in India are likely to start rising again. It is projected that the residential property segment will experience around 5% capital value growth in 2022. Several factors, such as supply and demand-side factors assessed over the last decade, have started to put upward pressure on house prices. Prospective homebuyers' preferences for bigger homes, better amenities, and attractive pricing will continue to drive residential sales momentum in 2022.
Source: Knight Frank Research
Office Sector Has Tailwinds of Record Information Technology Sector Hiring
The office market in India will be driven by the upswing in the Information Technology sector's leasing momentum. Based on the hiring in the past 18 months, Knight Frank Research estimates that the top five IT companies will have an incremental demand for office spaces of nearly 1.08 million square meters (11.67 million square feet) in the near future.
Co-working in Flexible Occupier Workspace Strategy
In the uncertain times created by the COVID-19 pandemic, businesses want to remain flexible on most cost components. As a result, the co-working sector will benefit as the need for agility becomes more significant than ever. Despite the return of normalcy, the co-working sector's association with agility will drive the demand rebound for flexible office spaces.
E-commerce Boom to Benefit Warehousing Sector
The e-commerce segment is expected to drive growth in the warehousing sector, with its share in total warehousing transactions projected to increase to 36% in FY 2023 (Financial Year April-March) from 31% in FY 2021. Overall warehousing transactions are estimated to grow at a compound annual growth rate of 20% in FY 2023. Speed and technology will play a crucial role in occupiers' warehousing strategy.
Digital Consumption and Policy Impetus to Drive Data Center Growth
With the imminent implementation of 5G and data localization norms, the need for data storage closer to its users becomes crucial, requiring the country's data center capacity to scale up quickly. Approximately 290 MW of IT load will be added in 2022, taking the total-built IT capacity to 735 MW by the end of the year.
In conclusion, the Indian real estate sector is set to witness significant growth and development in 2022. Residential properties are expected to experience rising prices, while the office sector will benefit from the hiring momentum in the Information Technology industry. The warehousing sector will thrive due to the boom in e-commerce, and data centers will expand to cater to the increasing demand for digital consumption. These trends in the Indian real estate market present significant opportunities for investors and developers alike.
Note: The content of this article is based on the original source, with additional insights and explanations added to enhance the reader's understanding.
