Insights on the Indian Real Estate Market Q1 2023

May 1, 2023

By Anshuman Magazine

Insights on the Indian Real Estate Market Q1 2023

As we move into the second quarter of 2023, it is important to reflect on India's real estate performance in the past quarter and to anticipate what the future holds. Despite the global economic slowdown, India remains resilient and is expected to sail smoothly even in turbulent waters. In Q4 2022, India's GDP recorded a growth rate of 4.4%, and CBRE India's growth forecasts for the country largely remain in the 5-7% range. 

Furthermore, moderating global oil prices and declining input costs could contain inflationary pressures in 2023, although a continued rise in food prices could weigh on core inflation. Despite global headwinds, India's manufacturing indicators have displayed resilience amidst realigning supply chains. This could be attributed to economical employment costs, infrastructure enhancement, and steady domestic demand. 

The performance of the Indian real estate market across various segments is worth noticing. A recent report published by CBRE India highlights the sustained absorption activity witnessed in the office segment at the start of the year, and despite current macroeconomic uncertainty, sound market fundamentals are likely to ensure swift recovery in the second half of the year. The need for productive interactions with relevant co-workers could cause occupiers to revisit workplace design standards, and the intense focus on RTO planning and hybrid working is likely to lead to the growing significance of workplace strategies in corporate agendas.

The industrial and logistics (I&L) sector is likely to remain resilient, with the entry of quality supply driving space take-up in 2023. The expectation is to counter any macroeconomic uncertainty with sustained leasing by third-party logistics (3PL) firms, flexible space operators, and engineering and manufacturing companies. 

Q1 Investments were dominated by land / development sites and the office sector. The reason why Bangalore, Delhi-NCR and Chennai led the leasing activity with 62% of cumulative share in Q1 2023. The year 2023 could see the listing of India’s first retail REIT and fourth office REIT further accentuating the substantial investment activity witnessed in Q1 2023, with steady inflows expected in the sector in 2023. While technology corporations would remain a driver of leasing activity, sectoral drivers are expected to become more broad-based due to sustained leasing by BFSI firms, flexible space operators, and engineering & manufacturing companies. GCCs are also expected to contribute to growth in the medium to long term.

The retail sector is set to witness a surge in supply surpassing 2022 levels, owing to the pent-up addition of new supply and the launch of several investment-grade projects in the past 1.5-2 years, which are expected to become operational in 2023. This, in turn, is expected to drive primary leasing demand, making it the main demand driver for retail space in 2023.

However, retailers will have to look beyond traditional malls and high streets to diversify their location strategies. This will facilitate supply chain transformation so that consumers can shop for any product, any time. In addition, the use of metaverse technology to enhance customer experience and social commerce, which involves leveraging social media sentiments, is expected to emerge as key omnichannel strategies in the retail sector. This makes the retail sector poised for a transformational year ahead, with new supply and innovative strategies driving growth and development.

Overall, the Indian real estate market showcases a positive outlook, with sustained demand for office spaces, industrial and logistics spaces expected in 2023.