Office, Logistics & Warehousing and Student Housing; Sunrise Sectors of Indian Realty in 2020: JLL - FICCI Report

MUMBAI, September 7, 2018 /PRNewswire/ --

• 2020 office absorption projected to surpass the historic high of 2011 which stood at 37 mn sq ft 
• Growing at a CAGR of 22.2%, logistics & warehousing set to witness close to INR 50,000 cr investment by 2020 
• Student housing expected to be an INR 2,400 cr market by 2020 

JLL, India's largest real estate services firm along with Federation of Indian Chamber of Commerce & Industry (FICCI), today released a report titled 'Future of India Real Estate: Deciphering the Mid-term Perspective' at the 12^th edition of FICCI Real Estate Summit. The report, co-authored by JLL & FICCI, analyses the drivers and challenges facing the sector in the next 2 to 3 years.

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India's recovery from the effects of demonetization and GST is reflected in 1Q2018 GDP clocking an impressive 8.2% growth. CPI inflation, which has been a concern in the recent past, is expected to remain at 4.7% in the annual forecast for median inflation (2018-19 and 2019-20).

   
    Promising market outlook
    Sectors                   Current status             Future outlook
                                                         To surpass 700 mn sq ft by
    Office (Grade A)          530 mn sq ft               2022
                                                         To surpass 100 mn sq ft by
    Retail (Grade A)          77 mn sq ft                2022
    Residential (Sales)       96,000 units in 2017       1,30,000 units in 2018 E
    Logistics & Warehousing*  138.5 mn sq ft (2015-2017) 252.7 mn sq ft (2018-2020 E)
    Student Housing*          INR 1,267 cr               INR 2,400 cr by (2020 E)

Apart from the macro-economic indicators, inflection points observed within each category of real estate markets indicate an overall stable growth in the medium term.  

*Logistics & Warehousing: The figures indicate total Grade A and B Warehouse Stock                         

*Student Housing: Calculations based on No. of Beds at an average annual fees of INR 1,50,000.

Ramesh Nair, CEO & Country Head, JLL India said, "India's real estate sector is at an inflection point and the evolutionary trends in the sector are paving the way towards sustainable growth of the industry. H1 2018 has seen phenomenal growth in Grade A office space from both, the demand and supply side. Private Equity interest in Indian retail realty is at an all-time high with the sector witnessing an investment of INR 950 cr in 2018. With regulatory reforms such as RERA and GST showing results, the sector is poised to grow exponentially. Student Housing, a new emerging sector presents a tremendous opportunity for the market."

Sanjay Dutt, Chairman FICCI Real Estate Committee said, "The sector has been through a bumpy ride in the last couple of years, but the environment is changing and the sector is back in the spotlight with key indicators pointing at the revival of Indian real estate. Key regulatory reforms such as RERA and REITs have given a new lease to the sector, and investors and end users are regaining confidence towards the recovery trends in the industry. Logistics & warehousing, commercial & retail are witnessing surge in demand and absorption. Overall trends are moving in the right direction for the Indian real estate sector."

Office Market: Steady Growth and Stable Vacancy Rate 

• Suburban sub-markets playing role; contributing more to office activity
• Co-working has almost doubled to 9% in H1 2018 over CY 2017
• Bengaluru is likely to see the highest absorption during 2018-2020; absorption rate in Mumbai to surpass supply during the same period
• NCR, Bengaluru and Hyderabad will contribute more than 60% to total in 2018-2022

Retail: Predictive analytics to aid future growth 

• As of 1H18, India's Grade A completed stock in the retail segment stood at 77 million sq and is expected to reach nearly 103 million sq ft by 2022
• Delhi-NCR likely to witness absorption during 2018-2020; closely followed by Hyderabad
• Absorption levels in Mumbai and Kolkata to surpass the supply during 2018-2020
• Mumbai to lead rental growth trends; with other markets rise

Residential: Affordable Housing Holds the Key 

• The number of new launches crossed the mark for the 1s time after eight quarters in Q2 2018
• Bengaluru & Mumbai remain the contributors to new residential launches
• < > within the INR 40 lacs pricing bracket were the highest during 2017 and H1 2018
• Affordable housing finance is estimated to burgeon into an INR 6 lac cr. business opportunity by 2022

Logistics & Warehousing: The Evolutionary Leap Forward  

• India to witness investments of close to INR 50,000 cr. for the creation of warehousing facilities across country between 2018 and 2020
• The sector is expected to grow at a CAGR of 22.2% in the period 2018 to 2020
• Large infrastructure projects like DFC, DMIC, Sagarmala Bharatmala to drive of the sector
• < > cumulative stock of 138.5 mn sq ft was recorded in 2017 for Grade A and Grade B across eight primary locations

Student has the potential to yield more than 12% returns vis-a-vis the core commercial sector in which returns remain range bound between 7% & 10%

• This sector is expected to grow at a 38% CAGR until 2020, to INR 2,400 cr.
• The is still at a nascent stage with the top 15 players dominating the organized space; cumulatively operating around 84,500 beds and plan to grow to 1,60,000 beds by 2020

The extent to which the real estate sector has grown can be gauged from investments in 'under construction' projects within investment grade real estate. This number which was about USD 173.9 billion in Q4 2012, has touched USD 242.6 billion in Q2 2018. India has moved up 30 ranks to the 100^th position on the World Bank's scale of countries in Ease of Doing Business for 2018.

Overall, strong economic fundamentals, proactive reforms and the use of technology will continue to boost the sector. Apart from the conventional sectors, the emergence of alternative segment (student housing and senior living) and greater demand from sophisticated logistics in the warehousing space are expected to be the drivers for robust growth and a promising future for the sector.

Report Link: https://jll.box.com/s/a6a8tpw25qecsdtkx34xhyosm72u08yy

About JLL India 

JLL is India's premier and largest professional services firm specialising in real estate. With an unaudited revenue for FY 2017-18 at INR 3,400 crores, the Firm is growing from strength to strength in India for over the past 20 years. JLL India has an extensive geographic footprint across 10 cities (Ahmedabad, Delhi, Mumbai, Bengaluru, Pune, Chennai, Hyderabad, Kolkata, Kochi and Coimbatore) and staff strength of over 10,000. The Firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services. This includes research, strategic advisory & consultancy, capital markets, transaction management, project & development services, integrated facilities management and property & asset management. These services cover various asset classes such as commercial, residential, industrial, retail, warehouse and logistics, hospitality, healthcare, senior living and education.

JLL India won the Five-Star Award for Best Property Consultancy at the International Property Awards Asia Pacific 2018-19. The firm is recognised amongst the top 100 Best Places to Work in India for two consecutive years in 2017 and 2018 in the annual survey of 'India's Best Companies to Work For' - a joint study conducted by Great Place to Work® and The Economic Times. It has also been acknowledged as 'Property Consultant of the Decade' at the 10th CNBC-Awaaz Real Estate Awards 2015. For further information, please visit www.jll.co.in.

About FICCI 

Established in 1927, FICCI is the largest and oldest apex business organisation in India. Its history is closely interwoven with India's struggle for independence, its industrialisation, and its emergence as one of the most rapidly growing global economies. A not-for-profit organisation, FICCI is the voice of India's business and industry. From influencing policy to encouraging debate, engaging with policy makers and civil society, FICCI articulates the views and concerns of industry. It serves its members from the Indian private and public corporate sectors and multinational companies, drawing its strength from diverse regional chambers of commerce and industry across states, reaching out to over 250,000 companies. FICCI provides a platform for networking and consensus building within and across sectors and is the first port of call for Indian industry, policy makers and the international business community.

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