In the first half of 2022, there were unprecedented sales and launch momentum. According to a joint analysis by a real estate consultancy firm and another industry organisation, property prices have risen across most micro-markets and sectors owing to record sales and developers' determination to pass on higher building costs to purchasers. It did, however, warn that the RBI's monetary tightening to combat inflation might boost lending costs.
"Except for a few locations, we are currently seeing a decline in unsold inventory levels throughout the majority of India's major cities." The drop is ascribed to strong sales despite consistent new product introductions. As a consequence, inventory overhang at the pan-India level is at a six-year low, with average quarters to sell for projects decreasing from over 15 in 2017 to sub-9 levels in H1 2022," according to a joint CBRE-CII analysis titled "Indian Realty - Charting the Growth Roadmap for 2022."
It also said that future asset price increases might be selective. Asset prices have risen as a result of strong sales momentum and developers' determination to pass on higher construction expenses (because of rising input and labour costs) to purchasers.
Concerning real estate investment, it was said that, encouraged by the steady recovery of the Indian real estate industry, investments in this arena increased by 4% year on year in H1 2022 to $3.4 billion. "During the time, the office sector accounted for 48% of investment activity, followed by development sites or land (33%)." What was noticeable was the huge improvement in retail investment, which accounted for 13% of total inflows in H1 2022 compared to 1% in the whole 2021."
According to the report, flexible space operators accounted for over six million square feet of office leasing activity in India in H1 2022. Because worker attitudes were modified during the pandemic and are unlikely to revert to pre-pandemic norms, the requirement for adaptability is higher than ever.
"As occupiers manage their real estate portfolios and commitments in the face of such hardship and uncertainty, the incorporation of flexible spaces into these efforts becomes increasingly vital." Companies that continue to use flexible workspaces will be in a better position to cut Capex, avoid upfront fit-out expenses, manage personnel volatility, and implement hybrid working arrangements. As a consequence, we anticipate that flex stock in India will reach 80 million square feet by the end of 2025," according to the paper.
According to the research, when markets reopened throughout India, queries and inspections increased, and the number of RFPs issued across cities increased. This buoyancy was especially obvious in Q2 2022, which saw record leasing activity - space take-up increased by 220 per cent year on year to 18.2 million sqft.
"Overall, leasing activity was 29.5 million square feet in H1 2022, up 157% year on year." We estimate gross absorption to reach the 53-57 million sq. ft. range by the end of this year, an adjustment from our earlier growth projection," it stated. In Q2 2022, the supply addition was 16.7 million square feet, a 64% increase year on year.
Overall leasing activity in the industrial and logistics sectors is likely to remain range-bound in 2022, at about 28-32 million square feet, a rise of up to 12% on an annual basis. "We believe that continuing growth of 3PL, FMCG, and manufacturing firms against the background of macroeconomic recovery will drive this space take-up," the research added.