Being in the real estate sector for over two decades, I have seen several highs and lows; however, right now these are very interesting times. The earlier thesis was that if the volumes go up, pricing is inversely proportional so it usually starts to cool off, but I have not seen this kind of environment where the volumes are up and pricing is also up. It’s the last few cycles that have witnessed this change.
Small changes making a large impact
With real estate growing across cities, not only metros but Tier 1 & 2 cities too, there is a visible change in infrastructure development whether its bridges, highways, metros, green buses, electric autos etc. If we go back in time, real estate was growing and infrastructure was catching up…so the building got done first and then a road was made there. Times are changing and infrastructure is catching up fast and, in a few cities, has also surpassed real estate. If we take Mumbai, projects like the Mumbai Trans-Harbour Link, Coastal Road projects, Airport development and Metro Rail expansions are like a fresh pulse in the heartbeat of the city.
Inverse relationship
So let me tell you the linkage between real estate and infrastructure. They are inversely proportional. The more infra gets build, the lesser value appreciation of your home because you don’t mind traveling that distance, but it’s still better for homebuyers as the pricing remains moderate. New locations get created with sufficient infrastructure.
Capital in mega cities
There are three cities – MMR, NCR and Bengaluru which attract the most capital from a real estate perspective. Almost 60 to 70% of all capital that is deployed goes to these mega cities, followed by 4-5 other cities that attract more foreign capital – Pune, Chennai, Hyderabad, Kolkata and to an extent Ahmedabad. There are also some tier 1 & 2 cities such as Jaipur, Indore, Bhopal, Lucknow who are the next recipients.
Connectivity and accessibility
While the big cities are seeing unprecedented growth, there is a new trend which mimics hospitality where customers are exploring second homes/leisure homes around the city or buying plots as land never depreciates. With new highways, airports and public transportation, travel has become far more connected and convenient. Proximity to metro stations or seamless access to coastal roads becomes a premium feature for developers and homebuyers.
Commercial & Retail equally important
If we are aiming at a 5-7% GDP growth, it is not possible just through residential. Commercial spaces, flexible workspaces, malls will play a crucial role. Office leasing in India will be witnessing the largest ever year – around 50 mn sf. Easy access to business hubs and shopping districts encourages foot traffic and boosts commercial viability.
Premiumization & Formalization
India needs an upgrade - slum rehabilitation, access to public infrastructure, fresh water, drainage systems etc. Every individual needs the right quality of shelter and every builder and our government are doing everything possible for the country to change.
I’m confident of seeing a new India in the next decade. What do you think?