In 2016, Indian economy had shot to the
top of the list of preferred destinations
with 7. 6 percent GDP growth for investment. It was also the fastest-growing
major economy, set for growth over 8.0
percent for next few years, but demonetization may put pressure on growth in
As we are preparing for 2017, let us take
a look at the major trends that defined
the past 12 months and will have a significant impact on prospects of the real
The year started with hope and optimism followed by many major real
estate policy changes; Amendments in
Real Estate Investment Trusts (REIT),
RERA (Real Estate Regulation Act,
Benami transactions amendment act,
Goods and service tax (GST and demonetization which will redefine new norms
of this sector.
• Local real estate market will need
to reinvent their strategies in 2017 to
prepare and respond to the changes
due to the macroeconomic local and
global environment. Market also need
to factor aftereffect of Trump policy
implementation as promised. India may
get impacted negatively due to Fed rate
increase, strong dollar, crude price
surge, FII outflow, etc.
• The recent highly controversial
demonetization initiative to render high-er-valuation notes worthless is designed
to drive cash from the “grey economy”
into the mainstream. Though it is likely
to knock growth temporarily, but in the
long run, driving black economy into the
real economy is likely another long-run
driver of growth.
There are few disruptive trends which
may shake up the corporate real estate
Office and Industrial
• Demand for mix use development:
Most Indian cities’ infrastructure is
crumbling with unplanned growth.
There is likely to be greater demand for
mixed-use developments as consumers
prefer to “live, work, and play” culture.
Office space usage will be redefined and
even rationalized. Companies should
choose locations in areas that have
concentrations of talent and revamp
design and development teams to cater
to changing consumer preferences.
• Infrastructure disruptions due to on-going metro and road work: Companies
need to be more strategic in analyzing
the impact of mobility patterns and
options on their long-term revenue and
profitability, exploring relocation, consolidation, design changes to existing
spaces, and revisiting tenant strategies.
• Co-sharing start up sector: Companies
based on the collaborative economy are
disrupting the way organizations lease.
Companies face challenges from new
competitors that are providing dynamically configurable spaces and flexible
leases. Owners need to rethink their
approach toward their offerings. Co-working space is fast catching up due
to lower cost-effective environment by
beside start up, entrepreneur, and even
large ecommerce companies.
Availability of talent: A shortage of
candidates with strong skills in rising
urbanization and preference for an open
and flexible work culture are changing
the employment marketplace and will
result in significant competition for
Introduction of REIT: India has seen
a boom in business-park develop-
ment. Suburban development is
creating entirely new businesses and
residential neighborhoods in every city;
Pune- Hinjewadi/Kharadi, Hyderabad-
Hitech city, and Bengaluru-Whitefield/
ORR are the best examples. Blackstone
has become the most prolific investor in
Indian commercial real estate, prepar-
ing to list first Indian REIT domestically.
Someother funds; Canada pension plan
investment board, Brookfield, GIC,
Tamasek, Qatar investments, Tishman,
and Morgan Stanley are also looking for
leased assets investments.
Digital economy last mile: Startup/
stand up’ and ‘Make in India’ policies
are driving young entrepreneurs to
take risk with supporting ecosystem.
Many youngsters are developing software and digital apps to bring positive
technological disruption to solve the
problem of masses in smaller towns
with speed, efficiency, and transparency at a much lower cost. Few online
real estate portals are also active in B
to C segment at nascent stage. There
are still challenges because of lower
internet penetration and usage of smart
phone in rural areas.
Office market demand will remain robust. Bengaluru and Mumbai remain the
top-ranked cities for prospects in terms
of both investment and development, according to the 2017 version of Emerging
Trends in Real Estate Asia Pacific, put
out by the Urban Land Institute. Out of
about 38 million square feet of office
absorption, Bengaluru continues to lead
pack among all key cities. New supply
was not able to cope up with increased
demand and resulted in increased rental in most micro markets.
• RBI is expected to continue with aggressive interest rate cuts which may
revive demand and growth.
• Institutional investors are now searching for higher yield, something they are
struggling to find in developed econ-omies/cities leading them to explore
higher growth oriented markets like
India. It may encourage foreign investors to invest into office and industrial
• Some local Institutional fund; Primal
Enterprises, India bulls etc., are also