Post-Covid, Indian real estate , despite facing global headwinds , has not only remained resilient but has also shown promise for growth. In this exclusive interview with Torbit Realty, Shishir Baijal, Chairman & Managing Director, Knight Frank India, a leading global real estate consultancy, talks about the expectations from the festive season, the promise of Tier 2 and Tier 3 cities, latest trends including foreign investment inflows and real estate prospects in 2023. Excerpts
How do you look at the realty sentiment of property buyers, occupiers and investors in post-covid period, especially looking at H1 2022 performance of the sector?
The home buyers sentiments are strong despite the fact that the repo rate has been increased by 190 BPS since the last 6 months which has made home loans dearer. We have seen a rise in primary home buying across most markets. Office segment too has been robust and with the first nine months recording lease deals of over 40 mn sq ft. We expect the new year to closely match the previous peak.
What are your expectations from the festive season this year? Will the residential sales momentum last through the new year ?
We expect the festive season to remain robust as the demand for homes will continue. COVID – 19 has conclusively altered sentiments in favour of home ownership and with supply side reforms ensuring timely delivery of homes, there is confidence amongst home buyers to purchase a house . Despite the increase in home loan rates since the last six months, these are still lower than those in the pre-covid times. This is a sentiment booster for home buyers.
What dominant trends do you foresee in the coming times , particularly the trend of rise of Tier 2 and Tier 3 cities?
Trends seen in the Tier 1 markets are likely to be mirrored in the Tier 2 and Tier 3 markets. But should home loan rates continue to rise, there will be a likely erosion of sentiments, especially in the price sensitive categories of INR 25 lakhs and below.
What according to you will be the growth drivers for Indian realty in 2023 ? Especially how do you look at the contribution of alternative asset classes ?
Despite slowdown in the global economic conditions, India has been recording strong GDP growth. The current IMF outlook for FY 23 remains well over 6%. Economic stability leading to job security and job creation will be the strongest factors leading to growth in commercial and residential real estate. The alternative asset classes, like student housing etc. remain in nascent stage in India, but as the economy recovers from its woes, these assets should also start seeing a positive change. Their journey to success is however going to be longer than a couple of years.
The first half of calendar year 2022 has seen a dip in institutional investments in real estate. Going forward, how do you look at the global investments scenario ?
Investments in real estate has seen a decline due to the global turmoil and liquidity withdrawal and rise in interest rates across all major economies, which is impacting movement of capital at a global level. However, given that India still remains one of the fastest growing major economy in the world, it will be high on the radar of global investors. The current volatility implies that this year will close lower in terms of investments, but we do understand that the office and warehousing assets. will attract larger share of the investments.
On one hand we see the growing popularity of high street retail and on the other hand, we find that mall magic is back. Comment
The retail market has attained a certain maturity, coming to terms with the omnichannel nature of retail. The brick and mortar retail is now more about providing holistic experience to customers. Malls that have perfected this dimension hardly have any space to offer to retailers; and with the low per capita retail space in the country, there is need to add more of such experiential retail formats.
Considering the global headwinds, how resilient is the Indian economy and real estate to withstand these shocks? Will the Indian economy support real estate growth in the coming quarters? How do you visualise short, mid-term and long-term scenarios?
India is not immune to global headwinds and has been impacted by the current challenges. Yet it has been able to continue growing despite adverse environment.. There is no doubt however, that India has the strength of its domestic market, which has been recording incremental growth. We hope this growth will continue in the short and the long term. The resilience of our economy will have its direct bearing on the real estate sector.