2021: Expectations for The Road Ahead

2021: Expectations for The Road Ahead

The COVID-19 pandemic has impacted nearly every industry, including the real estate sector, and its impact will continue to influence the market long after the virus has been eradicated. The tumultuous year, however, ended with the festive period in the fourth quarter raising market sentiments by a fair margin and the affirmation of a vaccine in the near horizon. This brings us to the new year – 2021, and with all eyes on the upcoming period, it deserves its share of crystal gazing. Here are some of the key expectations from the new year:

Office market to witness measured revival – While 2019 saw record quantum of office space absorption and new completions, in 2020 the pandemic brought it down by several notches. However, there is reason to believe that strong market fundamentals will help it sail through the rough waters. The pandemic-induced crisis notwithstanding, the country saw the launch of its second real estate investment trust (REIT), determined largely by the market’s capability to bounce back. There is still considerable demand in the market, but given the fact that the US and European markets were impacted severely, companies hailing from these countries would be cautious regarding expansion plans.  Also, quality office space supply would see some amount of constraint as developers would seek higher occupancies in their existing projects before launching newer ones. We believe the office market would pick up momentum in earnest only in the second half of 2021.

Continuity of WFH and the evolution of the workplace – Dynamic workplace strategies is the way forward and WFH will continue to hold significance. A part of the workforce would, thus, continue to work remotely even after the pandemic subsists and office spaces defined only by lease terms and rental values could soon be a thing of the past. Corporates, today, have realised the need for a plan that focuses on its future growth, including working outside the traditional office space and greater emphasis would also be paid to the adoption of technology, encompassing diverse arenas of work – right from CRM to construction.

Moderate resurgence in the residential market – With factors such as liquidity concerns, uncertainty of jobs and sluggish consumer sentiments, it is unlikely that that residential market would witness a speedy resurgence. The combined impact of the pandemic-induced insecurity and increased need for home ownership has led to a growing demand for ready-to-move units. All time low home loan interest rates, coupled with various measures announced by the government, a moderate revival is expected in 2021. Unlike pre-COVID-19 times, developers current objective is to complete their ongoing projects and sale of ready units, thereby catering to the demand of the buyers. It is, thus, anticipated that residential sales will see an upturn and affordable housing as well projects with ready units will observe positive momentum in sales.

Greater demand for warehousing and data centres – The Indian warehousing sector saw its prospects accelerated by the robust growth in the e-commerce industry observed during the COVID-19 crisis, much of the online demand emanating from the non-metros and other smaller cities of the country. The warehousing industry is, thus, set to witness a stronger presence in the forthcoming period, right from in-city warehousing to expanding its footprints in tier II and III cities of the country.

On the other hand, the rapid influx of data generation and consumption, as well as cloud adoption, has augmented the need for data centres in India. This demand will continue to increase in India, driven by increased cloud adoption, digital transformation, IoT and social media use.

Thus, to summarise, the year 2021 is expected to witness a gradual recovery.  The GDP growth is expected to enter positive territory in the fourth quarter of this fiscal and the real estate industry would continue to strive towards achieving normalcy – rather new normalcy. Further, other factors such as the government’s endeavour to institutionalise rental housing, successful REITs’ initiation and the emergence of tier II cities as centres of growth would accelerate positive buyer and investor sentiments, making 2021 one of the memorable years for the real estate industry – one that rose from the ravages of 2020.

Leave a Reply

Your email address will not be published. Required fields are marked *