Resilience stood out as the hallmark of the real estate market in 2019 amid all-round economic slowdown. Propelled by reforms across several sectors, India travelled several notches up on the ‘ease of doing business’ metrics to be ranked 63rd in the 190-nation ranking. This holds out hope for the year 2020 after a year of sluggish demand. However, in contrast to depressing news from several cities, Bengaluru seemed to be bucking the trend in several sectors.
If year-end reports are to be believed, CRE (commercial real estate) leasing maintained a rising trend with the segment registering 47 mn.sq.ft, a 30% increase during the first three quarters of 2019, surpassing its previous peak of 2018. It is expected to go past 50 mn.sq.ft in 2020. Of these over 15 mn.sq.ft. came during the Q3 of 2019, a rise of 23% in nine metropolises. Four cities — Bengaluru, Hyderabad, NCR and Mumbai — accounted for 80% of the leased space in the first three quarters.
The same period witnessed 43 mn.sq.ft. of new supply of office space. Again the same four metropolitan cities accounted for the major portion of the new supply. Technology sector has been still holding the sway among the new occupiers and is expected to continue to do so in the new year. However, with co-working exerting pressure, the companies are likely to realign their portfolios in keeping with the trend favouring flexible and collaborative workspace. Flexible space operators are also likely to target Tier-I and Tier-II cities in the months ahead.
A CBRE report foresees retail demand to pick up during 2020 based on its strong showing during the year past. It expects 4mn.sq.ft. to 5 mn.sq.ft. of investment grade mall development to go operational by the end of 2020. The year 2019 saw an investment of $196 million in the sector, which was though slightly less but comparable to the one in 2018. Chennai, Bengaluru and Hyderabad led the demand in retail space while in Delhi-NCR and Mumbai, fine-dining restaurant and sports good brand were the main drivers in the retail sector.
Sale of residential units in the top seven cities saw a marginal 5% rise during 2019 over that of 2018 i.e., 2.61 lakh against 2.48 lakh units. However, the sales during H2-2019 declined by 22% against H1-2019 owing to economic slowdown.
A report by Anarock Property Consultants says the residential sector in these cities registered a 21% rise in housing supply with a total of 2.37 lakh units being launched in 2019. However, the second half of the year registered 30% less supply than the first half (i.e., 1.4 lakh units in the first half and 97,000 units in the second half).
The year witnessed fresh impetus for several flagship schemes of the Union government such as Affordable Housing, AMRUT, and Smart Cities which are likely to sustain and enhance growth in 2020. Setting up of an Alternative Investment Fund of ₹25,000 crore for the stalled housing projects by the Centre is in fact likely to boost the growth in 2020.
Segment-wise analysis by Anarock reveals that affordable housing continued its growth momentum in 2019 with overall new supply rising by 22% – from 77,590 units in 2018 to nearly 94,530 units in 2019. Of this, 54,660 units were launched in the first half alone.
Meanwhile, unrelenting liquidity crunch continues to grip realty. According to Shobhit Agarwal, MD & CEO, Anarock, the outlook for 2020 would depend on swift on-ground implementation of some of the previously announced sops including for stressed funds. Of the total $93 billion loans to Indian real estate, $14 billion (or 16%) is stated to be in ‘severe stress’ category, 62% (or $58 billion) is completely stress-free, while 22% (or $21 billion) is under pressure and can be potentially resolved. Of the ones under ‘severe stress’ category, MMR, NCR and Bengaluru share almost 80% of the amount. Of the loans extended to developers in Bengaluru, only 1% (or $160 million) fall under the ‘red alert’ category. Bengaluru owes its positive image largely to lower demand-supply mismatch and gradual rather than haphazard growth, concludes the Anarock report.
Emergence of several new sectors such as REIT, co-working and co-living, affordable housing, senior and student housing inspire hopes for a brighter outlook for the year ahead.