The real estate industry has faced several transformations in terms of how an asset will be used, valued, and sold in 2023. Following a pandemic-driven course correction in the past few years, the economy experienced uncertainty and a downfall. However, the real estate industry is now set to move beyond the past as strong and positive momentum is expected to continue. Furthermore, in FY 23, the market will grow with a solid structure, increasing demands, and lowered home loan rates.
Several rating agencies have estimated that the growth of Indian real estate is in the range of 8–9% on an annual basis. This surge can be the result of increased commercial activities, elevated job markets, and enhanced income levels, which will naturally translate into increased real estate demands. Now let us delve into how the market scenario will look for Indian real estate in 2023.
Healthy returns in commercial real estate (CRE)
It is expected that CRE (commercial real estate), which is one of the attractive domains of the real estate sector, will deliver healthy returns now that organisations have returned to offline work. In accordance with that demand for grade-A office spaces, data centres and co-working spaces are on the rise. JLL predicts that due to rising demand, the Grade-A office market will reach 1.2 billion square feet by 2030.
Several physical stores are now gradually opening and functioning at the level of the pre-pandemic era. Furthermore, e-commerce companies are competing with one another to expand as widely as possible by expanding their logistical and warehousing operations. Looking forward to all these factors, it is expected that 2023 is going to be promising for the CRE.
The housing market has a high potential.
Previously, the housing market was hit by inflation, increased mortgage rates, and a shortage of building materials. However, it is expected that this market is going to witness a strong revival. Residential sales have already surged 51% in the post-pandemic era. Moreover, Reuters expects that the prices of the houses will increase by 7.5% in value all over India.
While the economic indicators are in favour and have a positive tick, the government is also thriving to curate policies that will help the revival of this sector. In the years to come, the housing market will likely prosper due to the expanding economy, a return to pre-pandemic working conditions, and a number of other factors.
Tier 2 and Tier 3 cities will be emerging real estate markets.
The growth of real estate in the development centres, such as Tier 2 and Tier 3 cities, will be promising in the year to come, as it will experience tremendous socio-economic growth. Several potential buyers are already looking at these places as a substitute for the overcrowded and polluted metropolitan cities. Tiers 2 and 3 cities are quickly establishing themselves as real estate hubs where a healthy housing market continues to support the expansion of the infrastructure as a whole. These cities will be competitive with metro areas in FY 23 and present a wide range of residential and commercial investment opportunities.
As fragility has persisted in other financial assets, real estate seems to be a viable alternative for investors. Even though the market in the past few years faced several disruptions and turbulences, in the long term, it is still considered a safe investment. For 2023, it is expected that the growth will be positive in terms of quantity and quality. The industry experts believe that interest rates will play a major role in reshaping the landscape of the real estate sector.
The real estate market has a strong aspirational value, and it tends to provide a constant income on a rental basis for both large and small property owners. Indian investors are once again recognising the advantages of real estate investing, particularly at a time when cautious investment is still the general consensus. For those looking for long-term as well as short-term investments in the real estate market, 2023 is an exciting time to discover.
(The author is Mr. Arshdeep Singh Mundi, Executive Director, Jujhar Group and the views expressed in this article are his own)