Road Ahead for Real Estate in 2022

The remarkable turnaround seen by residential real estate along with significant gains made by emerging new asset classes, last year, despite Corona onslaught, has laid a strong base for the overall growth of real estate in 2022. ….Vinod Behl

Residential real estate market successfully countered pandemic with home sales growing 71% YoY at 2.37 lakh units, with MMR and NCR markets alone contributing 1.16 lakh unit’s sales. Maintaining the momentum on account of continuous low interest rates and moderate home prices, FY 23, according to Crisil projections, is likely to see up to 10% sales growth, touching 210 msf in the top six cities of NCR, MMR, Bengaluru, Pune, Hyderabad and Kolkata. Equally significant is smaller cities of Surat, Jaipur, Patna, Mohali, Lucknow and Coimbatore, according to Housing.com study, will be hot residential demand drivers in 2022. Emerging residential segments like student housing will also push housing growth in 2022 and beyond.

The commercial office sector, hit hard by the prolonged lockdowns and WFH is poised to stage recovery from Q4 FY 22, well into FY23, with net leasing /absorption of new office space of Grade A commercial office space across top 6 cities closing on to pre-pandemic levels. Indicating recovery prospects, office occupancy levels are expected to improve to 87%, nearing pre-pandemic levels of 85%. Rising demand for flexible space and growing demand for satellite offices (hub and spoke model) in smaller towns due to work from anywhere, will drive commercial office demand in 2022.

The year 2022 has a promising outlook for investments in real estate, building on the strong broad-based investments. The statistics are quite encouraging. While foreign and domestic investments continue to be robust, what is significant is that capital inflows in the residential segment have seen 200% increase YoY, with residential and industrial-logistics together attracting $ 2 billion of foreign institutional funding in 2021. Considering that there are strong fundamentals and attractive valuations of the underlying assets, with a promising economy, there will be a strong appetite for long-term capital across different asset classes

The high consumer sentiment also bodes well for recovery and growth of real estate in 2022. As per the findings of the 33 Market Global Survey conducted by Ipsos., as many as 80% Indians against the global average of 61% are quite optimistic about the bright prospects of 2022, expecting the economy to chart a growth path in FY23. The IMF has projected a growth rate of 8.5% in FY23. What further matters is that the sentiment of India Inc. is equally positive as business leaders expect the economy to bounce back in the new fiscal year and they are ramping up their operations and stepping up hiring.

A recent survey by the housing finance major, Godrej Housing Finance about consumer sentiment is no less significant. The survey reveals that about 77% of respondents say that they have become more open to asset building and property purchasing as an investment lifestyle choice. This bodes well for real estate. But the big question is will the new variant of Covid-Omicron, upset the real estate recovery. Experts believe that the recovery process should be durable with reforms and progressive policy support. Moreover, the businesses aided by technology, have learnt to be resilient and adaptive to disruption to maintain business continuity. The upcoming budget with a proposed 30% hike in infrastructure fund allocation for highways, along with other supportive measures, should see the real estate sector getting the desired impetus in 2022.