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The Real Estate Scene In India

2 Jul 2019, by Informa Connect Insights

Recent market trends impacting the real estate industry1

The real estate sector in India in 2018 has been influenced by regulatory reforms, coupled with trends such as the rising penetration of technology, investments in emerging asset classes and the government’s push for affordable housing.

Co-working is emerging as the go-to business model, finding favour especially among start-ups, boutique firms and SMEs. It is being recognised as the ‘future of work’ considering benefits such as flexibility, cost savings of around 20-25 per cent and on- demand accessibility being offered. Its share in office space absorption has jumped exponentially from 3 per cent in 2016 to 10 per cent in 2018.[2] Bengaluru, Mumbai and Gurugram seem to have a higher concentration of co-working spaces due to a vibrant start-up ecosystem and availability of infrastructure.

Listing of REITs in India is expected to spur greater availability of funds from investors and create a robust market for income generating assets, providing investors with a regulated institutional platform. Currently, 32.6 million square feet of commercial space is listed on the country’s first REIT.

Co-working spaces are resulting in significant demand traction while REITs are helping mobilise funding for developers in the office segment.

Another collaborative space sharing model, co-living or community living, has targeted young professionals and millennials in major Indian cities and is being tagged as a housing solution for the millennial workforce. The population in the age group of 18-35 years is inclined to rent co-living spaces and the top seven co-living operators have recorded an occupancy rate of more than 80 per cent.[3]

The real estate sector has also received a major boost from the affordable housing segment owing to government push. The catalysts include establishment of an affordable housing fund, Pradhan Mantri Awas Yojana (’Housing for All’ by 2022), granting of infrastructure status to real estate, lower GST rates, subsidies and a PPP policy. As many as 69 lakh rural houses and 12.4 lakh houses in urban areas have been built till February 2019.[4]

Warehousing realty is gaining momentum post-GST implementation and industry players, especially organised retail, have shown an insatiable appetite for this segment. Warehousing stock in the top eight cities grew by 23 per cent from 2016 to 2018 reaching 170 million square feet. India is expected to receive investments of INR500 billion for creation of storage facilities between 2018 and 2020.

Real estate tech has now grown from the initial phase of software and marketplaces to the advanced phase of technologies supported by the Smart Cities Mission. Real estate operators are progressively exploring opportunities to harness digital technologies such as AR/VR, AI and IoT to develop smart homes. These are helping real estate companies create a value proposition by targeting specific issues, promoting, building automation and maximising comfort, environmental quality and sustainability.

Trends shaping the real estate market in other Southeast Asian countries:

[5]Singapore: The demand for office and co-working spaces grew considerably supported by expansion plans of technology companies while hospitality segment witnessed traction owing to Meetings, Incentives, Conventions and Exhibitions (MICE) events and growing

[6]Thailand: Trends in the residential market include mixed-use projects, increasing usage of home automation and rental management Flexible workspace is emerging as a key factor in increasing absorption of office space. Retail rents are rising despite threat from e-commerce and online shopping, the occupancy rates are high.

[7]Vietnam: Tourist arrivals surged in 2018 encouraging investor interest in the hospitality segment. Investments are also on rise to create efficient logistics infrastructure.

[8]Philippines: Transformation in the retail sector is providing a boost to the investments in industrial real estate, logistics infrastructure and multi-storey warehouses.

What current issues are impacting your industry?[9]

Despite positive trends, the Indian real estate sector, particularly its residential segment, faces certain challenges.

Although several new regulations – RERA, GST, IBC – have been introduced in the past three years to improve standardisation and transparency, the slow pace of their implementation and lack of uniformity across states for RERA are key constraints. Hence, the industry is still facing project delays and long approval and clearance processes, significantly weakening buyer as well as investor sentiments in under-construction properties.

There has been a slowdown in residential sales leading to a substantial amount of unsold inventory, especially in the high priced housing category. Small developers are finding it difficult to clear the inventory as buyers have entered a wait and watch mode for price decline and are preferring completed or nearing completion projects. Unavailability of land banks in urban areas has also caused the cost of land to rise[10] in some of the major cities of India, including Delhi-NCR and Mumbai.

This slowdown is creating a major challenge for real estate developers while they raise funds. The situation has been aggravated by the financial turmoil faced by non- banking financial companies leading to a severe liquidity crunch for the real estate sector. The cost of funding has increased significantly.[11]

Other Southeast Asian countries are also home to the most dynamic real estate markets in the world; however, they still found lagging when it comes to transparency in corporate governance, transaction costs, environmental and safety standards.[12]

  • Singapore[13]: Residential sales tapered by 5 per cent in 2018 due to significant increase in prices and the resulting cooling measures taken by the government. Rising interests are also increasing the cost of borrowing.[14]
  • Thailand[15]: Residential market is weighed down by shrinking domestic demand, increasing prices, interest rates, down payments and land cost. Unsold inventory in upper end of the condominium market is being offered at discounted
  • Vietnam[16]: Disputes over allocation of land to large projects are causing legal issues. There are also bureaucratic challenges once the project has been completed such as granting certificate of

How should the governments adjust regulatory priorities to attract more investments?

Since 2016, the Indian government introduced various policies – RERA, GST, IBC

– to address key issues, attract investments, and improve transparency in the real estate sector. However, an effective implementation road map that aligns regulations across states and gives clarity to all stakeholders in the value chain is the need of the hour.

Currently, a developer has to take an average of 25 approvals for each project, thereby extending project timelines by 18-30 months[17]. A streamlined online process and a single window mechanism for granting approvals and clearances will benefit both developers and buyers and reduce project delays.

Granting industry status to real estate can enable easier access to funds for developers at an affordable rate, thereby reducing borrowing costs.[18] An outlay for the overall housing fund, not just affordable housing, is likely to go a long way in injecting liquidity in the market.

With cities facing land crunch, it is also essential to revisit FSI norms to meet current real estate requirements.

The government can also reduce the holding period for REITs from three years to one year to encourage investments.

The new budget is expected to address some of these issues while simultaneously improving market sentiments and boosting investor confidence.

The governments in other Southeast Asian countries can also take steps to address the challenges within the sector and improve investor attractiveness:

  • Singapore[19]: Government may need to step in to add price controls on residential property to stabilise the prices. With inflation not meeting targets, measures will also need to be put in place to improve the flow of finances within the real estate sector. Restrictions on foreign ownership and purchase of vacant land and landed properties can also be relaxed.[20]
  • Malaysia: Tax incentives and improvements to the Sales and Service Tax (SST) regime have been proposed to stabilise the property market and attract foreign capital.

Where in the industry do you see growth opportunities? [21]

Rapid urbanisation is likely to provide growth opportunities for the Indian real estate market driving demand for integrated housing solutions in the next 10 years. Industry growth can be supported by the government’s push for affordable housing.

On the other hand, the office segment may continue to witness high absorption in key cities and emerge as a major contributor to future growth of commercial real estate. The expectations of high returns from REIT listings can channelise increasing investor participation in the segment.

The advent of technology is also opening up new segments within the real estate sector including green rated buildings, smart cities, smart homes and smart warehousing.

Apart from conventional segments, emerging segments such as student housing, co- working, co-living and warehousing may witness higher investments in the future. There is enormous potential for developers to expand the current student housing capacity by approximately 100 per cent every year for the next four to five years, given the large unmet demand for student accommodation. Further, warehousing is expected to pull in USD10 million in the same time period22. The demand for co-working spaces is also expected to increase by three times in the next three years.[23]

Growth prospects for other Southeast Asian countries[24]:

  • Indonesia: The government is focusing on developing transport infrastructure. This has the potential to create opportunities for transit-oriented and industrial estate developments
  • Malaysia: Retail and office segments are emerging as favourable investment areas
  • The Philippines: The office segment remains robust with a positive growth outlook fuelled by demand from outsourcing companies. Further opportunities are available around major central business districts (CBD)
  • Singapore: Expansion of technology companies is opening up new possibilities for the office segment with rents expected to rise over 15 per cent for FY20 and penetration of flexible workspace set to increase. Singapore is also expected to attract more hotel investments as tourism grows
  • Thailand: The hospitality segment is likely to drive growth as tourist arrivals continue to increase. There are also opportunities for office renovation projects in the Bangkok CBD, as CBD is currently experiencing stock shortage
  • Vietnam: The industrial real estate segment is poised for strong growth as global businesses are viewing the country as an attractive destination for their industrial operations. Green buildings and hotels are also expected to drive [25]


Neeraj Bansal
Partner and Head
Corridors (ASEAN, HK, Taiwan)



Don’t miss your chance to hear from Neeraj Bansal at the upcoming Commercial Real Estate Asia Conference happening from 10-12 September 2019. He will be a speaker in the session of Commercial Trends in Co-working spaces on Day 1 of the Conference.

This conference is a part of Asia Property Week, co-located with the 2nd Annual PropTech Conference. Register now to meet 200+  industry thought leaders to explore new trends and business opportunities!

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[1] Indian real estate and construction: Consolidating for growth, KPMG-NAREDCO, September 2018

[2] Net Absorption of Commercial Office Space in India Projected to Surpass 39 mn sq ft by 2020: JLL, 14 December 2018 ( , Accessed on 19 June 2019)

[3] Co-living: rent a lifestyle, Knight Frank, 2018

[4] The Modi Years: How close is India to affordable housing for all?, 18 June 2019 ( , Accessed on 19 June 2019)

[5] Outlook for Singapore property expected to improve in 2019, Business Times, 30 January 2019 (, Accessed on 19 June 2019)

[6] Thailand’s real estate market outlook for 2019, RETALK, 15 February 2019 (, Accessed on 19 June 2019)

[7] Southeast Asia 2019 Outlook, JLL ( , Accessed on 19 June 2019)

[8] Southeast Asia 2019 Outlook, JLL ( , Accessed on 19 June 2019)

[9] Indian real estate and construction: Consolidating for growth, KPMG-NAREDCO, September 2018

[10] Rise in land cost may hit highway schemes, Times of India, 06 June 2019 (, Accessed on 19 June 2019)

[11] NBFC fund crunch begins to hit real estate sector, Times of India, 12 November 2018 (, Accessed on 19 June 2019)

[12] Asian property markets need more transparency, Nikkei, 17 August 2018 (, Accessed on 19 June 2019)

[13] 5 Singapore Property Trends To Watch In 2019, MSN, 31 December 2018 ( , Accessed on 19 June 2019)

[14] Singapore property market facing ‘many challenges’: Redas president, Business Times, 19 September 2018 (, Accessed on 19 June 2019)

[15] Thailand’s real estate market outlook for 2019, RETALK, 15 February 2019 (, Accessed on 19 June 2019)

[16] What challenges do Vietnamese real estate businesses face in 2019?, Customs News, 22 March 2019 (, Accessed on 19 June 2019)

[17] Real estate sector’s expectations: Uniformity in RERA, Deccan Herald, 26 May 2019 (, Accessed on 19 June 2019)

[18] 5 Major Issues in the Indian Real Estate Sector and What We Think Should Be Done, Daily Hunt, 29 August 2018 (, Accessed on 19 June 2019)

[19] 5 Singapore Property Trends To Watch In 2019, MSN, 31 December 2018 ( , Accessed on 19 June 2019)

[20] Singapore: house prices rising strongly, but challenging year awaits, Global Property Guide, 17 April 2019 (, Accessed on 19 June 2019)

[21] Future of Indian Real Estate, JLL FICCI, September 2018

[22] Warehousing may pull in $10 billion in next 4-5 years, Economic Times, 18 February 2019 (, Accessed on 19 June 2019)

[23] Demand for co-working spaces to triple in 3 years: Report, The Hindu Business Line, 21 June 2018 (, Accessed on 19 June 2019)

[24] Decoding South East Asia Real Estate: Insight for owners, Colliers, March 2019

[25] What challenges do Vietnamese real estate businesses face in 2019?, Customs News, 22 March 2019 (, Accessed on 19 June 2019)


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