Darshan joined the family business post-graduation from Babson College in Boston, United States, in 2015. He is spearheading the residential sales, marketing and customer relationship management (CRM), as well as the rapid expansion of Vaishnavi’s commercial portfolio. He also oversees the leasing and maintenance of the commercial buildings.
The real estate sector is the most recognized and profitable sectors worldwide, comprising of four subsectors called housing, retail, hospitality, and commercial. The Indian Real Estate market is undergoing a rapid transformation since the last decade which is resulting in geographical expansion of the market across the country, the emergence of new concepts – from student & senior living to co-living & co-working among others.
Embracing innovation, fostering transparency, and prioritising sustainability are the key strategies enabling the industry to overcome obstacles, thrive, and flourish in an ever-changing market.
These transformational changes led by the tectonic shift in the way we live, work and entertain ourselves is leading to a faster growth of all real estate segments in India. The construction industry of India ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. In case of Real estate sector, the rapid adoption of co-working spaces which now constitutes roughly a fifth of net office space absorption and the return to office has helped in expanding the market.
Growth Index of Real Estate Sector
The CREDAI and CRE Matrix report revealed that, the Grade ‘A’ office space in the top six cities seen is expected to touch 1 billion square feet by 2030 from 700 million in the first quarter of 2023. Similarly, initiatives such as Real Estate Regulatory Authority, Pradhan Mantri Aawas Yojna and Smart Cities have helped build trust with homebuyers while catering to their evolving housing needs. From affordable to value to premium segments, housing properties across price points are witnessing brisk demand. Moreover, the growing purchasing power of households has brought back the focus on offline retail with malls across the country registering an uptick in footfalls while several large malls are being constructed across metros in a testament to developers’ and investors’ appetite.
Role of Technological Advancements in Real Estate
Technology is one of the key factors in these advanced age of industry, for real estate also it is playing a crucial role in democratizing real estate in India. From helping in discovery of residential projects online to enabling retail investors participate in the commercial real estate growth story through REITs or fractional ownership at the click of a button. Using drones and SaaS platforms to monitor construction growth, technology is rapidly gaining inroads into the real estate value chain. This democratization of the space is opening it up for the larger customer and investor base, thereby helping expand the market. Inclusion of technology is helping to provide data backed insights to empower developers and investors better plan their projects and investments while helping plug leakages and keep costs in check. India is quite new in adopting technology in real estate but is witnessing the growth of new age startups helping to cater to the diverse needs across the value chain. Over the next decade, it’s fairly possible that the technology ecosystem around real estate would mature and further propel the growth of this industry.
Residential Vs Commercial Real Estate
An investment in residential property is primarily for own self or for accommodating one’s own family and secondly for a rental income. Households investing in residential projects are less risk averse and look for stability in returns. Other side, commercial real estate requires deeper market insights, an understanding of the evolving economy and commercial needs of companies. However, they provide much higher returns as compared to the residential segment that are more prone to market fluctuations. While a residential property is a liquid asset and can be marketed and sold by households, commercial real estate requires a special approach and subject matter experts to liquidate. Another differentiator is that while there are takers for residential property across the country, an organized commercial real estate can largely be found in metros. Additionally, REITs and fractional ownership do enable retail investors across the country to invest; it requires market understanding to make the most of it.
Recent Trends in Real Estate
Indian real estate market offers a plethora of options to gain rich returns. The residential market is rapidly growing across the country. Today, a majority of retail investors prefer to invest in residential property due to its sentimental value and its importance as an asset in Indian culture. This sector is showing a steady flow of monthly rentals and has been offering returns in the range of 5-8% and even higher in central and secondary business districts in metros. After the break out of the pandemic, people understood the necessity to have their own home. Surprisingly, few new concepts like fractional ownership and alternate investment funds are opening up the commercial real estate space for retail investors where they can own a share in the property at a fraction of the cost. For an investor, it is very important to check the properties constructed by established developers and in developed or upcoming secondary business districts. Secondly, the market conditions, interest rates, risk appetite and pricing of the project becomes important while investing in either of the real estate segments.
Crucial Factors to Adhere in Real Estate Sector
Economic Volatility & Market Fluctuations: Real estate industries often navigate uncertain waters in a world where economic conditions can change rapidly. Economic downturns and fluctuations can lead to decreased property demand, stagnant property values, and increased competition among real estate businesses. To overcome this challenge, real estate professionals must develop adaptive strategies to weather economic storms. Diversification of investment portfolios, focusing on properties with consistent demand (such as rental properties), and staying well-informed about market trends are essential steps to mitigate the impact of economic volatility.
Regulatory Hurdles & Legal Complexities: Real estate transactions are subject to myriad regulations and legalities that vary from one jurisdiction to another. Navigating complex zoning laws, property rights, and environmental regulations can be daunting. This can be catered by engaging legal experts specializing in law. Conducting thorough due diligence before any transaction and maintaining client transparency can also help build trust and ensure compliance with legal requirements.
Technological Disruption & Innovation: Advanced technologies are navigating this sector and it realigned the way properties are listed, marketed, and transacted. The oldies, who are unable to adopt the new advancements are lagging behind the tech-savvy new generation. Innovative technologies like, virtual property tours, online listing platforms, and data analytics tools, can give real estate businesses a competitive edge by enhancing customer experiences, streamline operations, and stay relevant in a digital age.
Rising Costs & Affordability Concerns: Real estate professionals can explore sustainable and cost-effective construction practices to address the challenge of ever increasing market cost. Collaborating with local governments to promote affordable housing initiatives and exploring financing options that cater to first-time homebuyers can also contribute to alleviating affordability concerns.
Changing Consumer Preferences & Expectations: With advancement of technologies, preferences of the customers have changed. Modern homebuyers and renters seek properties that offer energy efficiency, smart home features, and sustainable design. Real Estate developers of today are investing in eco-friendly technologies, promoting green building practices, and showcasing the value of sustainable properties can attract a growing segment of environmentally conscious buyers.
Final Words
Indian real estate industry has been constantly evolving to meet the work, stay and satisfy the requirements of today’s generation. Before making an investment, the prospective investors should properly assess their risk profile, developer profile and history and a deeper understanding of REITs and fractional ownership to get the best returns out of their investments. With increasing purchasing power, hybrid work mode and a wave of premiumization in the market, concepts such as premium living, student and senior housing to co-working are gaining traction.
In addition to gain profits, this sector is taking care of the environment, by actively working towards reducing its carbon footprint to be in line with India’s Net Zero by 2070 goal. This assumes significance as sustainability is not just societal commitment but rather has become a business imperative as it results in significantly low operational costs and an increasing number of occupiers of commercial real estate are banking on such projects. India is one of the fastest growing nations in the world, and the real estate sector is fostering this evolution by uplifting the overall socio economic scenario.