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Indian Real Estate Prepares For Re-Entry To The Next Normal Economy: JLL
the institutional investors are expected to be risk-averse and cautious over the next few quarters leading to extended investment cycles.
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India's real estate will experience a paradigm shift as the national economy feels the impact of COVID-19 pandemic, according to JLL India.
Real estate occupiers and investors will receive some respite due to the government's 270 billion dollar relief package, said the professional services firm specialising in real estate and investment management.
But they will need to reconsider pre-crisis priorities and accelerate new strategic initiatives to adapt to the next normal in the economy.
All segments of real estate will be impacted in some form or the other due to COVID-19 but the economic contraction will lead to some pre-crisis trends and themes that will have to be fast-tracked, said JLL's report titled 'The Next Normal -- Real estate in a post-COVID world.'
The report stresses that broader adoption of industry megatrends will reshape and reinvigorate the sector for long-term growth.
"As we reopen our businesses in a staggered manner, let us brace ourselves to the short-term jolts and be ready to embrace the impending prospects of growth in the medium to long term," said Ramesh Nair, CEO and Country Head (India), JLL.
"Real estate as an asset class is here to stay. However, reinvention is important to remain relevant in the next normal world. We are seeing fast-paced adoption of technology and artificial intelligence and these are most likely to be the new catalysts of growth in the next normal," he said.
Nair added that the focus on health, sustainability and wellness is also seeing a renewed vigour and is becoming the leitmotif across asset classes.
In the last decade, said the JLL report, India's real estate sector has experienced several disruptions led by technology and changing preferences. However, these disruptions have only expanded the gamut of real estate offerings while redefining the way we live and work.
On one hand, consolidation of the residential market is likely to further gain momentum with a strong emphasis on credibility and financial strength and on the other, de-densification and splitting up of offices are likely to gain centre-stage.
The report said office market fundamentals are strong with low vacancy, steady rentals and limited upcoming supply. It is expected to recover the fastest once the outbreak is under control.
The residential market's revival hinges on the intensity and duration of a pandemic. As consumer sentiments improve post the lockdown period, sales in the affordable and mid segments expected to show initial green shoots of recovery towards the end of 2020 with the onset of the festive season.
While annual investments crossed 5 billion dollars in the last three years, 2020 started on a weaker note. The time period between January to March saw a 58 per cent decline in investments year-on-year with transactions paused.
A nationwide lockdown meant no face-to-face meetings, site visits, legal due diligence and financial closure, therefore leading to transactions coming to a standstill.
"Income stability, indispensable business operations and occupational density are expected to be the key determinants for investment evaluation. Data centres, logistics (including warehousing), critical office outsourcing facilities and global in-house centres are expected to attract capital," said the report.
In the short term, the institutional investors are expected to be risk-averse and cautious over the next few quarters leading to extended investment cycles. Institutional investors are expected to assess the progress in each sector and are likely to focus on asset management and support projects that require last-mile funding in the short term, the report added.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.