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Shishir Baijal – Real Estate – Ripe Time for Sunrise Sectors

Investment Outlook , Published Feb 17, 2019

Shishir Baijal

Shishir Baijal

Chairman & Managing Director at Knight Frank India.

Going forward, sunrise sectors of co-working and
co-living would attract increased investor interest.

Overview

In 2019, institutional participation (global
and domestic) is bound to increase, while
newer investment products like Real
Estate Investment Trusts (REIT) are going
to enhance the real estate investment
offerings. We are at a cusp of a co-living
and co-working revolution with several
large players spread across the country.

While the potential and opportunity provided
by real estate has always been known,
recent structural changes that have
improved the risk-return scale should make
wealthy investors, who are still on the fence,
take note of the industry. A spate of recent
structural initiations – Real Estate (Regulation
and Development) Act, 2016 (RERA),
Goods and Services Tax, and the Benami
Transactions Amendment Act have
improved transparency and governance
standards in the sector. This has led to
investor empowerment with better control
and awareness about the risks associated
with real estate investment.

In 2019, institutional participation (global
and domestic) is bound to increase, while
newer investment products like Real Estate
Investment Trust (REIT) et al are going to
enhance the bouquet of real estate investment
offerings.

There is strong evidence of the commercial
office sector growing even further owing to
factors such as low vacancy level in prime
markets, constrained supply of quality office
space, a steady demand scenario and
strong rental growth. Given the strong
policy focus on the construction of crucial
national highways and industrial corridors,
we estimate continued strength in logistics
and warehousing sectors. These would
attract growing interest from occupiers and
the overseas investor community.

Going forward, sunrise sectors of co-working
and co-living would attract increased
investor interest, besides student housing
and senior living segments. There are several
factors that would play a vital role in
pushing these sectors to the forefront.

Globally, as the
number of
people working
in these facilities
swelled exponentially,
the number
of co-working
spaces worldwide
also
increased.

The office space segment has evolved
significantly in the past few decades, growing
at a healthy pace. Companies increasingly
acknowledge the role of the work
environment in enhancing employee productivity
and this, in turn, has provided the
perfect platform for the mushrooming of
dynamic co-working business centres.
Globally, as the number of people working
in these facilities swelled exponentially, the
number of co-working spaces worldwide
also increased.

We are at the cusp of a co-working revolution
with several large players spread across
the country. The proliferation of start-ups
and SMEs along with sustained and
focused efforts in terms of policy push by
the government has provided strong support
to the segment. Further, private equity
players have also been looking up to invest
in co-working start-ups.

Alternatively the co-living segment has
emerged as an equally popular concept
among the urban population. Several home
rental aggregators and hospitality companies
have already ventured into co-living
franchisee arrangements or partnerships
with local players. Furthermore, unorganised
players in the paying guest accommodation
segment are also creating co-living
spaces in partnership with established
operators.

forever-appreciating

India’s economic growth and the massive
push towards infrastructure and allied
industries would ensure that warehousing
and logistics continue to show strength.
Our economy’s secondary and tertiary sectors
have attained a certain level of momentum,
from where they will continue to push
forward. Eventually, this should bode well
for the residential sector too.

forever-appreciating

Overall, we feel that the high-end residential
market will take some time to rebound
and the mid-income housing segment will
be positively affected by a host of government
initiatives and the inherent demand.
Industrial, office, and retail sectors are likely
to continue to do well.

The highlight, nevertheless, would be the
hope, created in 2018, by upcoming niche
sectors of co-working and co-living.

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