End-User Demand is an Investment Opportunity


There is no better investment than land (plots) because the construction cost for a particular specification remains the same - the multiple comes on the basis of quality, delivery, brand etc. In the current scenario, prices of plots in Tier 2 cities have increased substantially and the percentage on the return beats the return on apartments or floors. In the metros, floors are drawing a lack of traction and since the supply of floors versus apartments is limited, there is a huge appreciation in the price of floors. The apartment prices have seen minimum appreciation because there are lots of unsold inventory of under construction apartments available in the market.

Post the pandemic, work from home is an abiding reality. The pandemic has changed the way we live, the way we consume products, and the way we handle life. We have learnt to manage life without stepping out from our homes, both professionally and socially. In fact, we have performed better working from home and personally we have been able to maintain work-life balance more efficiently. There are no traffic jams to deal with, no parking hassles and huge savings in our pockets. During the pandemic the skilled workforce went back home and thanks to digitization and the availability of 4G in small towns, work never stopped.

Investment in real estate is a science and not commerce as people normally perceive. Truly speaking REITs is the best way of investing in real estate as it is professionally managed, regulated - listed, gives an opportunity to invest in small or big amounts and most importantly - all due diligence with respect to real estate has been observed.
Further, let me add my thoughts for the benefit of consumers.
Government property plots by the HUDA, PUDA, NOIDA authorities etc., or Group Housing by government bodies like DDA etc., are all safe to invest in. Government properties are mostly sold by virtue of a draw, so allotment is safe.
For developer properties the customer must be completely informed when buying a developer property. RERA has brought in a lot of transparency and one must make sure that the property he/she is investing in has a RERA number. The customer must check that the details in the brochure and website match those on the RERA website. Customers must try to connect with a financial institution – PE, NBFC, to check the financial status of the developer.

I would say it is a ‘buyer-seller’ market for the first time in the last two decades. Let me explain what I mean in detail: Buyer’s Market
  • Home loan rates are at an all-time low, hence affordability has increased.
  • Various State Governments have given incentives such as reduction of stamp duty, cut in circle rates and other government fees.
  • Prices are at an historic low.
  • Developers are offering freebies, customized payment plans and other incentives.
  • Finally, after the second wave of COVID, the need for a personal residence has become paramount for individuals, hence we have seen a substantial increase in transactions.
Seller’s Market
  • Ready-to-move-in inventory is practically all sold, hence with renewed demand, developers are finding it easy to sell property under construction.
  • RERA has stepped forward to support the developer by extending the completion time by six months in lieu of the lockdown during the pandemic. The developer is using this to commit to a date which he can honour leading to increased confidence in customers who want to buy.
  • Overall, with the end of the pandemic, the economy is back on the growth track and with the support of the government, developers find it easy to sell.

The Future of Commercial Real Estate


The comeback certainly looks to be stronger than the set back. The overall confidence is strong and Real Estate (RE) remains attractive to investors.The industry is gradually emerging stronger, smarter and more powerful and taking a positive shape. Adoption of digital technologies, higher stress on safety, hygiene, and amenities to support the new norm of social distancing are paving way for Innovation, Recalibration, Restructuring and Reshaping of the Industry.
There are a number of factors viz. fast-paced vaccination program, employees coming back to offices, digitalization, increased job opportunities and demand across commercial space that have together brought economic activities on track, with the result that we are poised for a major transformation in the Commercial Real Estate Space.
New norms in Commercial RE such as Hub & Spoke Model (Flex spaces), Shared Spaces, Co-working spaces, Reverse Migration to Tier-2 & Tier-3 cities, have stagnated the progresses within the industry, which was already on slow down mode due to Covid-19.
Post Covid-19, current developments have become location and industry specific -
  • IT/ITs have become prime drivers for leasing activities in top cities followed by technology, BFSI, consulting, and manufacturing occupiers etc.
  • In Q3 2021, IT/ITs observed 34% transaction while manufacturing accounted for 3.7 mn sq ft or 29% of the total area transacted. This can be attributed largely to a 1.5 mn sq ft transaction by a wireless technology hardware manufacturers.
  • Tier-2 & Tier-3 cities getting momentum due to employee centric policies resulting in developing flex/hybrid models @ regional levels.
  • Private equity inflows in Commercial RE have been increasing.
  • Listing of REITs has brought increased liquidity inflows to the Commercial RE.
  • As 7,400 office leases of 90 million sq ft, are up for renewal in the top 6 cities in 2021, and seeing the industry’s bulk hiring spree certainly gives positive momentum to the current fiscal and 2022 & 2023.
  • Net office absorption stood at 4.39 million sq ft in Q2, showing 32% YoY growth in major cities, while new completions have grown by 6% compared to corresponding period of the previous year.
  • Q3 2021 has been the strongest quarter of the year, with 12.5 million sq ft of office space transacted, a 168% growth in YoY terms.
  • By the end of 2021, the market is expected to witness a growth of 20-30% due to activities happening in the second half.
  • Revival in retail spaces, reopening of malls and specially F&B’s coming back, and increased spending of customer has put retailers on the recovery mode.

Looking at industry developments, new norms and factors influencing development in Commercial RE, business development activities will be on the recovery mode till Q3 2021, and will reach pre-Covid level post Q4 2021.

To meet uncertainty of business, whether relating to physical infrastructure or virtual wellbeing, we must be future ready at any time or at any cost.Covid -19 has reshaped or realigned the viability of business ready infrastructure. We have all experienced a changed scenario during the last twelve months, from lapses in IT infrastructure, mobility, smart & intelligent network, data security, efficient workspaces, remote workplaces, health & wellness etc.
  • Demand for business ready infrastructure is poised to grow not only in top cities but smaller cities as well, due to the following factors -
    1. Elasticity of occupancy tenure and quick scale-up & down possibility.
    2. Ease of entry & exit.
    3. Exposure to external innovation.
    4. Enabling of core business.
    5. Aimed specially for IT teams.
    6. Cost advantage for smaller occupiers
    7. Plug and Play option
    8. Expansion in newer markets
    9. Greater Agility to business change
  • In India we do have more than 200 co-working and 400 shared services providers, and due to Second wave CREs have witnessed more service providers/operators/corporates reaching out to them as they are now switching towards smaller spaces for their staff, incurring no maintenance or service cost (13 percent of the leasing in Q2 2021, up from a 5 percent share in Q1 2021).
  • Leasing out to Operators, CREs will be benefitted by reducing leasing risk, through tenant diversification, passing leasing risk to co-working provider, and adopting technology to make more effective assets.
    Until things are normalized, we should look at co-working and shared service operators for leasing out our spaces as it would open opportunities as well as give us the benefit of increased ability to attract new tenants, reduce pressure of leasing smaller spaces or incubation space for large tenants, put unused spaces to efficient use managed by operators, result in efficient utilization of dead spaces, enhance property visibility/marketing and improve property values etc.

The game of economics came into play during the pandemic. Lesser the demand higher the supply, resulting in price depreciation in Realty Sector and specifically in Commercial Real Estate (office, retails, institutional etc.)It all started post lockdown, drying up cash, with no business activity for occupiers, and customers ending up at home with no purchasing power, and rules & regulations completely ruled out, all resulting in no movement of business operations. Of course restrictions were lifted later, but by then there was no cash and no customer.
  1. Occupiers willing to pay or not pay rentals resulted in conflict with landowners with most compromising on rental free period or 50% lesser leasing amount.
  2. Renewals of spaces not administered resulting in vacant spaces.
  3. Net absorption not picked up or declined during the pandemic while completion increased manifold.

Since Quarter 2 of 2021, demand has picked up across commercial leasing, and will be stagnant till second half of 2021. It would take time till next year to parallel with what was there before the Covid-19 outbreak. Demand and Supply Ratio: Since April 2021, as net absorption increased so do completion. Demand & Supply Ratio stands at 1:2

Unlike financial investment opportunities, split ownership has given idea of investing even smaller amount into large sized properties, which were out of reach for a retailer investor.For example, you are not able to buy a property size worth 100 crore, but small fraction of 10 lacs could get you split ownership of a big sized property with rental income.
  • Higher capital appreciation
  • Allows Investors to invest in premium properties and earn a monthly rental yield, thereby helping build long term wealth
  • Unlike investing into own property, there are no hassles of operating or managing commercial property

Whether it is a property owner or person considering investing in commercial properties, always address the first question as to ‘what will the investor get’ or ‘what is the Return on Investment’ or in simple words what would the property yield?.
Before going into further details, first let’s understand why the yield is important in commercial property, not only because it ensures the investor’s additional risk is taken care of, but also a comparison is mandated which signifies potential return b/w two or multiple alternatives.In layman’s words, yield is generally calculated by dividing the annual rent income on a property by the price paid on the property.
Before going into further details, first let’s understand why the yield is important in commercial property, not only because it ensures the investor’s additional risk is taken care of, but also a comparison is mandated which signifies potential return b/w two or multiple alternatives.In layman’s words, yield is generally calculated by dividing the annual rent income on a property by the price paid on the property.
Impact of Covid -19 in 2nd wave, has done more damage in comparison to first wave, but still commercial Real Estate has a brighter side and office space is suffering a stagnant growth. In short while long term would result in at least 6-7% yield, for a short-term period, capital appreciation is on verge of growth, due to development in REIT space.
Development in REIT space has given hope to the commercial Real Estate Sector, by bringing liquidity and attracting institutional & retail investors, resulting in appreciation in both asset yields and capital. A constructive opinion signals an increase in asset yield due to factors like big corporates going into smaller offices across cities. Thus organizations can have lesser interaction among employees, and help encouragement of co-workspaces. Vaccination drive has brought trust among corporates moving back to office space, resulting in higher demand for rentals, hence higher yields for investors
.Future prospects for asset yield appear to be quite positive. Demand may now be stagnant, but in long term aforementioned factors would bring cheer amongst both the investors as well as the developers.

Real Estate’s Developmental Path


A1. Before Covid 19, the Realty oceans were at peace, characterized by slow and steady tides and cool pleasant winds. Covid lockdown in March 2020 was the cyclone that jolted people into the realization that much was missing in their residences, and there could be emergency situations and accordingly they were required to plan ahead. The goal was to reach their harbor fastest. Online searches, tele pre sales traffic, loan checks, savings consolidation etc became top priority. As the lockdowns lifted and infection reduced, site visits increased. Masks became the raincoats in the showers and sanitizers the protecting umbrellas. Dream was to take their pots of gold to the end of the rainbow and park them there permanently. Fear of pirates enroute, ensured that they went only to reliable developers through trusted channels. The second wave in April 2021, in addition to the above, reinforced the realization that hybrid office model was practical and online shopping too, provided few safe guards were ensured. Residential is doing well and commercial will recover too.

Developers with ready to move residential and large plots are in a great space currently. Rest depends on the timing of the third wave, speed of vaccination and economic revival.

Home automation for the millennial population is now amongst the prerequisites. They are totally technology driven. Door locks, spy cams, electronic controls, courier delivery, EV charging, videophones are amongst their essentials, and the list is endless. Work from home, study from home and healthcare or home isolation with the all-important communication set up is an imperative.

The Role of the Digital has transformed and grown tremendously in scale and reach. The prolonged pandemic has further enhanced its coverage and comprehensiveness. The Digital is everything today. It surrounds us unfailingly and if we do not embrace it, we will be totally demolished. Shortage of time causes impatience. If a brand is not vibrating in your face with psychedelic lights, you are drowning. Therefore don’t lose sight of the lighthouse in the middle of a stormy night.

Real Estate work culture will gravitate towards home delivery. Going to the client will be the norm. Sales, post sales, relationship management etc will have to be done right at the doorstep. Realty’s Eureka moment! Organizations will have to navigate these transitions with respect to people and processes. The compass must have spectacular leadership skills. Monsoon may be torrential but preparedness and prudence can help Sales and Marketing tide through and ride the turbulent waves.

About Torbit

BY: Torbit

Torbit creates real estate content in various forms so that all stakeholders can consume and gain an understanding of the industry. People with decades of experience in the industry generate content on Torbit. We also publish a fortnightly Real Estate Newsletter with key interviews, trend and analysis, new launches, spotlights, as well as many recent research and other articles for a complete industry update. Forums are also available on the platform where people can ask questions, receive replies, and inquire about industry experts. Torbit's yearbook provides a comprehensive analysis of the year that has passed in terms of market prospects and predictions for the future. Industry can integrate and generate more valuable content, discuss and interact on new trends, policies, updates and MPRE using Torbit to create and consume content.

Torbit is a mascot of merging Tortoise and rabbit, the intellect of Tortoise and pace of rabbit will work together and a creation happened with the name of Torbit. TORBIT is consolidating the best of knowledge in real estate from the very accomplished people in the industry, and creating a pool of credible content. TORBIT is your mascot to help you navigate through the roads of investment to making your final real estate purchase. TORBIT is like a torch that shows the clear path to the developer, from the financial institutions to the customers and the intermediates. TORBIT acts as a service provider for all your real estate needs be it buying – selling, legal paperwork, financing, regulatory and compliance services, RERA services, and the entire gamut.

Torbit was created by Mr. Sanjeev Kathuria, who has over three decades of experience in the real estate industry. He spent years in real estate and realized buyers' pain points, so he decided to create a knowledge pool so buyers can get educated and make informed decisions.

To date, he is among the few Real Estate authors who write down their experiences, thoughts, opinions, and timely predictions. He is Founder, Author, and CEO of Torbit Consulting. Over the years, he has presented and published over 100 insights related to Real Estate, such as NBFC crises, Property ka Sahi Daamkya, motivation of sales teams, and best practices in the industry.

The Torbit content team is currently comprised of over 100 real estate bigwigs, who are writing insightful articles about the real estate industry. Niranjan Hiranandani, chairman Hinanadani Group, Renu Sud Karnad, MD, HDFC Limited, Deepak Parekh, Chairman HDFC, Akash Ohri Group Executive Director and Chief Business Officer at DLF Home Developers Ltd, Harsh Vardhan Patodia Nationa President CREDAI, Sanjay Dutt, Tata Realty MD & CEO, are some of the many names mentioned above.