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4 Trends that will Dominate Indian Real Estate in 2023

February 9, 2023

By Ram Chandnani

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The past few years have been a roller coaster ride for the Indian real estate industry, with economic & geopolitical uncertainties, the impact of COVID-19 pandemic on human life and the environment, and other global & national challenges. However, with the resumption of regular economic activities, the Indian RE is witnessing a spectacular recovery, particularly in the office segment where leasing activity jumped by 40% Y-o-Y in 2022. As we’re in 2023, here are some key real estate trends that might dominate the Indian markets in the year ahead.

Flexibility & Hybrid Working in Offices

With the emergence of flexible working trends, occupiers may adopt RTO & hybrid working strategies that gauge employee preferences, articulate clear RTO goals & identify new working styles. Factors like employees’ commute patterns, prioritizing accessibility in site & asset selection, and flexible offices in suburban locations will play a critical role for office occupiers. We are also expecting an increased emphasis on workplace quality and experience to drive engagement. Technology enablement, sustainability, and health & wellness features, supporting services, brand immersion strategies & functional space designs will become key aspects in enhancing the workplace experience.

Sustainability to Become Key Drivers

According to a CBRE report, buildings account for 40% of green house emissions globally. Sustainability is thus becoming a key consideration for real estate occupiers, developers and investors as both a moral obligation and fiduciary responsibility. We could see an increase in the share of Grade A developments across segments. Our recent report, ‘Shoring Up Indian Supply Chain’, suggests a rise in the share of Grade A developments in overall I&L from 35% to 50% of the stock by 2030. A similar trend has been witnessed by the Office segment where a strong supply pipeline and continued investor interest in investment-grade buildings by leading developers and institutional owners in core locations to lead an increase in development completions in 2023. The appetite for investment-grade assets with a perfect blend of technology, wellness and sustainability features would remain strong.

Technology Enablement to Shape Experiences

Digital tools have become critical in improving property management and supply chain resilience & planning. The focus on digital investments is shifting steadily and taking a prominent place across the lifecycle of real estate, right from project management, master planning to property management, portfolio management and much more. Talking about its role in the I&L industry, it now seems to focus more on demand and supply management than supply chain visibility. Further, the Retail sector has also seen a great tech push to bring people back to offline stores – as a result, the convergence of offline and online is likely to remain a key retailer strategy in the year ahead.

Movement Toward Tier 2 and Tier 3 Cities

Across industries, from Retail to Office, Industrial and Logistics & beyond, we could witness a strong sentiment of expanding into Tier 2, Tier 3, and even Tier 4 cities. Our recent report, India Market Monitor Q4 2022 projected how these locations will gain traction in the Retail sector in terms of supply addition and demand as retailers and landlords look to leverage the spending power of these towns and cities. Corporates are also opening offices in these regions to cater to the suburban workforce through hub-and-spoke or flexible working models. Tier 2 and Tier 3 cities are also driving the next phase of growth for the I&L sector as supply chain disruptions boosted e-commerce consumption, leading to growth in demand for storage spaces and logistics services in these regions.

Final Words

The real estate sector has undergone a major transformation in the past few years and as it continues to function in a dynamic environment, it needs to evolve and adapt to the changes in the economy and consumer demands. While technology enablement, sustainability, flexibility and movement to Tier 2 & 3 locations will dominate the industry in 2023, favorable government policies are also expected to foster growth in the domain. As a result, global investments might also expect steady inflows after an all-time high of USD 7.8 billion in 2022.