“The JLL India report suggests that office and retail real estate have been on a fast recovery. Given the promise of favorable impact from REITs and FDI liberalization, this enthusiasm is likely to continue”
Leading international property consultancy JLL India in partnership with the Confederation of Indian Industry (CII) released their new research report on the Indian real estate industry at the annual CII Realty & Infrastructure Conclave in Mumbai today. The report, entitled ‘Indian Real Estate: Coming to Terms With Varying Speeds of Growth’ was unveiled during the packed event, attended by the A List of the Indian real estate fraternity, at Taj Mahal Palace Mumbai.
The report makes a case for the varying speeds at which real estate asset classes have been performing in India over the past few years, and outlines the reasons behind this. The divergence in speed and direction of growth within the office, retail market and residential markets finds its roots in the country’s economy, which is also moving at multiple speeds within specific sectors. The report also highlights that the glaring complexities that arise in allocating investable resources across asset class within real estate, and cautions investors to sharpen their research and focus so as to continue to extract good returns from their real estate investments.
Anuj Puri, Chairman & Country Head, JLL India said, “This report mentions the challenges presented by varying speeds of growth in the Indian real estate sector, but it also suggests real-time solutions. One of these is increased speed in the delivery and implementation of policy initiatives. For instance, the current consumer confidence levels possibly signal that the potential growth rate of retail real estate is rising, but the constraints presented by inadequate supply and excessive competition require intervention. Likewise, the residential market currently faces a dual challenge of product-mismatch and affordability – both of which can be addressed by clearing approval-related delays.”
Unidirectional growth within real estate sector has made way for corresponding growth trends across office, retail and residential markets. The linkages between these sectors with the broader economy must be properly understood, because there are still opportunities for super-normal returns in real estate. The exuberance of PE funds flowing into this industry at a time when real estate equity market capitalization is abysmally low is definitely a case in point.
Other Report Highlights:
– Office and retail real estate, which together form the commercial real estate segment, have been on a fast recovery. Demand has been strong since several quarters and rents have seen healthy upside momentum. Given the promise of favorable impact from REITs and FDI liberalization (in construction, retail and manufacturing), this enthusiasm is likely to continue.
– The residential real estate sector is still under some stress overall, given the high amount of unsold inventories across many leading cities. The type of funding available currently is a strong indication of the risk distribution across sectors – debt gaining strength in the residential sector, and equity gearing more towards commercial assets.
– Faster delivery of reforms and executions related to affordable housing and infrastructure can go a long way in welfare-oriented real estate development. While the government would benefit by promoting its agenda of housing for all through this, the real estate fraternity would benefit from newer areas of growth.