The fundamental headwind today is the uncertainty around the spread of Omicron, the new variant of COVID, as it has the potential of creating another round of disruption, he said
India is expected to witness a strong bounce back of demand across residential, commercial and warehousing segments provided the Omicron spread is not severe, said Shishir Baijal CMD Knight Frank India. He spoke to ET about the recovery across real estate asset classes and the scope it offers to investors. Excerpts...
What are the current headwinds facing real estate, other than the pandemic?
Post the Global Financial Crisis (GFC), investments in Indian real estate declined by 71% during Q1-Q3 in 2009 as compared to the same period in 2008, and the markets for homes in major cities which had been booming in the summer of 2006, were clearly in distress. The GFC impacted both the commercial and residential segments equally. However, the post GFC recovery for the commercial office segment was steady reaching a peak of 60 mn sq ft in 2019. The residential segment saw a brief period of recovery from 2009-2012 after which, for numerous reasons, the segment saw a prolonged slowdown. Residential sales started inching up only in the second half of 2020. A sharp recovery was seen as a result of the pandemic and due to the streamlining of supply, a low interest rate regime, improvement of affordability, demands stimulant measures by some states and a definite shift in buyer sentiments that preferred physical assets. The commercial real estate (CRE), in the same period of the pandemic battled periodic disruptions due to recurring waves of COVID-19. Having said that, with strong growth in hiring, the inherent demand for office space remains buoyant
The fundamental headwind today is the uncertainty around the spread of Omicron, the new variant of COVID, as it has the potential of creating another round of disruption. However, the learnings from previous lockdowns will help us prepare better for any impending challenges arising from it. If we can meet the challenges of the pandemic, Indian real estate across asset classes will see strong momentum both in terms of demand and supply. It is the sentiment and the scare of the pandemic that is hurting the real estate sentiments across segments in the country
Give us a sense of how the real estate category has been faring. How do you expect it to behave in 2022?
The Indian office market is expected to witness a recovery soon, driven by record hiring and expansion in the IT sector. Based on the hiring trend of the past 18 months, the incremental demand for office spaces by the top 5 IT companies is expected to be nearly 1.08 mn sq m (11.67 mn sq ft) over the next two years, once offices open to full capacity and WFH gradually reduces
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