The findings of CBRE South Asia’s ‘India Market Monitor – Q1 2022’ have been released. The report highlights the growth, trends, and dynamics in India’s real estate sector across various segments.
According to the report, housing sales increased by nearly 13% Q-o-Q to more than 70,000 units in Q1 2022, and sales increased by nearly 40% year-over-year. In comparison to Q4 2021, the affordable/budget segment’s share of sales remained stable at 27 percent in Q1 2022. While sales in the high-end category increased to 23% in Q1 2022 from 16% in Q4 2022, sales in the mid-end segment decreased to 41% in this quarter. On a quarter-over-quarter basis, sales in the premium and luxury housing segments increased slightly.
In Q1 2022, new unit launches increased by nearly 30% year over year, surpassing the 60,000-unit mark. The mid-end and high-end categories dominated new launches in the country, with shares of 43 percent and 30 percent, respectively.
“The residential sector is set for a strong 2022, with both sales and new launches expected to perform well after a strong year last year.” “A strong performance by the residential sector is likely to be aided by the government’s continued policy push (especially to the affordable and mid-end segments), improved vaccination coverage, revival in economic activity coupled with attractive mortgage rates,” said Anshuman Magazine, chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE.
“While we believe that the mid-end and affordable categories will continue to drive sales, premium and luxury categories have seen renewed investor interest, fueled by expected capital value appreciation and increased activity by HNIs and NRIs,” said Gaurav Kumar and Nikhil Bhatia, MDs of CBRE India’s capital markets and residential business.
Cities in the western part of the country continued to drive sales and unit launches, according to the report. Pune had the highest share of housing sales in Q1 2022, with 27%, followed by Delhi-NCR (21%), Mumbai (20%), and Bangalore (20%). (14 percent ). Pune led the way in terms of new unit launches, with a 29 percent share, followed by Mumbai (22%), and Hyderabad (12%). (20 percent ).
*Rise in capital values likely; asset pricing trends would remain divergent with an uptick expected on account of growth in sales and rising input and labour costs; *Rise in capital values likely; asset pricing trends would remain divergent with an uptick expected on account of growth in sales and rising input and labour costs
*Sales will be driven by mid-range and low-cost categories; however, premium and luxury categories are expected to see renewed investor interest.
Larger unit sizes are becoming more popular as hybrid work and sporadic homeschooling become more popular; plotted developments are becoming more popular as they offer more flexibility in terms of configuration and ancillary amenities.
*As end-use becomes more important than speculative investment and buyers become more informed, developer reputation, execution capabilities, and financial position will become more important in home purchase decisions.
Office: The positive leasing momentum is expected to continue.
*Supply additions in Q1 2022 totaled nearly 9.4 million square feet, down 11 percent year over year and 41 percent quarter over quarter; leasing activity totaled 11.4 million square feet, up 97 percent year over year but down 25 percent quarter over quarter.
*In Q1 2022, small to medium-sized deals (up to 50,000 sq. ft.) dominated space take-up, accounting for nearly 84 percent of all deals. *Bangalore, followed by Hyderabad and Chennai, dominated supply, accounting for 70 percent of all deals.
*Technology companies accounted for 34% of total leasing activity, followed by BFSI (17%) and flexible companies (13%).
*Leasing activity is expected to strengthen further in the coming quarters as occupiers begin to realign their post-pandemic business strategies due to a combination of pent-up demand and expansion / consolidation-led leasing.
Continued supply growth is expected, with developers focusing on large-scale, high-quality buildings to differentiate their assets and attract occupiers.
*Large institutional players will continue to invest in greenfield projects through joint ventures, partnerships, and platforms, as well as brownfield projects through REITs, which will boost supply in the coming years.
*Occupiers are expected to rethink workplace designs; demand for sophisticated and tech-enhanced real estate will rise as occupiers focus on providing a safe and healthy workplace for employees while also meeting their flexibility needs.
Tier-I cities are driving the industrial and logistics sector’s upward growth trajectory.
In Q1 2022, I&L leasing activity increased by 19 percent year over year, reaching 6.5 million square feet.
*Medium- to large-sized deals (more than 50,000 sq. ft.) dominated the leasing activity with a share of 71 percent.
*With a share of 27 percent, Delhi-NCR led absorption, followed by Mumbai (21 percent), and Kolkata (14 percent) (16 percent ).
3PL players and retail firms were the main demand generators on a sectoral level.
In Q1 2022, 5.8 million square feet of new supply were added, up 95 percent year over year.
*Space take-up is expected to reach 35-37 million sq. ft., driven by continued e-commerce and 3PL expansion against the backdrop of macroeconomic recovery and increased online retail penetration.
In 2022, warehousing facilities with features like a high ceiling to accommodate automated stacking systems, enough loading and unloading zones, and power backup provisions are expected to gain traction.
Implementing emerging technologies across the supply chain, such as AI, blockchain, Big Data, IoT, and so on, is likely to improve delivery throughput and operational / space efficiencies.
*Continued supply chain disruptions would prompt occupiers to examine their I&L portfolios in order to improve supply chain resilience. Occupants should consider using ‘just-in-case’ inventory strategies in addition to ‘just-in-time’ inventory strategies.
Capital inflows are expected to increase, with domestic investors focusing on greenfield assets. Global investors are expected to show a greater preference for brownfield / platform acquisitions.
*Retail leasing activity in Grade A malls and high streets reached 0.5 million sq. ft. in Q1 2022, up nearly 40% year over year.
*In Q1 2022, investment-grade mall supply additions were led by Hyderabad and Bangalore.
*Prime malls and high streets are expected to remain the most desirable locations. Some retailers may be able to locate / scale up across these key destinations and malls as a result of the churn.
While demand for QSRs, supermarkets, electronics, and consumer durables is expected to remain stable, demand for fashion and apparel, as well as beauty, is expected to pick up due to pent-up demand.
Retailers are increasingly partnering with direct-to-consumer companies to increase foot traffic for legacy stores and establish a physical presence for emerging retail brands, often through branded kiosks or within department stores.
*As a result of shifting consumer priorities and increased M&A and PE activity, consolidation is expected to emerge as a key outcome. At the same time, social commerce in areas like food and beverage, grocery, apparel, beauty, consumer electronics, and home décor would fragment and layer the retail segment.
Land / development sites dominated investments with a 38 percent share, followed by office (35 percent) and retail (19 percent) sectors. *Mumbai, Delhi-NCR, and Chennai together accounted for about 64 percent of the total investment quantum in Q1 2022. (38 percent )
*While institutional investors have primarily invested in brownfield assets, developers have remained committed to greenfield projects.
*In Q1 2022, foreign investors accounted for 59 percent of total investment volume. The UAE (36 percent), Canada (11 percent), and the United States (11 percent) were the top three sources of capital (7 percent )
*During Q1 2022, nearly half of total capital flows were deployed for pure investment / acquisition purposes, with the remaining 45 percent invested in development / greenfield projects.
*An increase of 5-10% Y-o-Y is expected in investment value in 2021; greenfield assets are expected to see a strong investment uptick.
*Developers will continue to invest in development opportunities to expand portfolios; institutional investors are expected to be more interested in core and core-plus assets due to their lower risks. Banks are expected to make a strong comeback in the CRE sector in 2022, with a focus on construction finance and LRD routes. Alternative Investment Funds will continue to be a major source of funding for the CRE sector, as NBFCs plan to set up such funds to meet funding needs. Amid rising digitisation and strong policy pushes towards a digital economy, investments in alternative assets, particularly data centres, could gain traction; sustainability and ESG practises to emerge as stronger themes in investment strategies. REIT investments are expected to rise as a result of portfolio expansion and the launch of new REITs.