Investment Outlook , Published Feb 17, 2019
Chairman & Managing Director at Knight Frank India.
Going forward, sunrise sectors of co-working and co-living would attract increased investor interest.
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.
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.
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.
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.
Investment Outlook 2019