Commercial real estate demand in India has risen, and is at its highest post-Covid. The ROI in commercial real estate is ‘comparatively higher than the residential market’ and well established players are actively seeking collaborations with local developers to launch new projects as joint ventures, said Ravindra Pai, Managing Director, Century Real Estate. “In office space leasing, tech occupiers were key drivers of the aggregate market leasing activity in July 2022 with a 53 per cent share. Banking, financial services and insurance (BFSI) had a share of 18 per cent,” Pai said in an interview with FinancialExpress.com. The company is planning to foray into commercial real estate in FY23, alongwith eight new launches in the residential segment in the pipeline. Here are the excerpts from the interview.
How is residential real estate performing currently? Where do you see this segment in the next 5-10 years?
In the years preceding the pandemic, the ticket size Rs 60-80 lakh was the sweet spot in Bengaluru. Following the pandemic, the industry is witnessing strong demand from Grade A players in the plotted segment in this price range, as well as luxury homes. Today’s luxury buyers are increasingly on the lookout for open spaces and homes with more greener neighborhoods. Indian residential real estate has been witnessing steady growth over the past two quarters of this FY 22-23 on account of declining inventory and rising rentals with hybrid and remote work becoming commonplace. This coupled with the increased interest from retail customers looking to acquire income-generating assets, pandemic-led uncertainty and decadal low home-loan interest rates have helped drive up the sales during the pandemic.
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What other real estate segments (asset classes) are attracting more takers today? Why?
The other real estate asset classes that are attracting investors today are warehousing and data centers, which are seeing a steady increase in demand. We foresee that more investments will be made here in the next 3-5 years. Data centers require large land parcels with ready infrastructure and give higher returns (12-14 per cent). Additionally, warehousing has already become an established asset class that gives returns of upto 10 per cent. Another emerging segment to watch out for is co-living or student housing.
How are today’s investors looking at residential real estate as an asset class? Which among residential and commercial properties are more in demand?
While residential real estate is picking up pace and catering to more first-time home buyers, the demand for commercial real estate is at its highest post-covid due to many offices reopening. In fact, the ROI in commercial real estate is comparatively higher than the residential market (where the standard returns would be 4-5 per cent). In terms of office space, tech occupiers were key drivers of the aggregate market leasing activity in July 2022 with a 53 per cent share. Banking, financial services and insurance (BFSI) had a share of 18 per cent.
Do you think the festive season has any role to play in the sales of residential real estate?
Despite the repo rate hike, the real estate industry is gearing up for strong sales in the upcoming festive season, with many players setting aggressive targets for sales booking during occasions like Dusherra and Diwali. We expect all major builders to introduce a slew of festive offers, which help sustain demand for residential real estate.
How is the company performing currently and what is your outlook for this fiscal?
We had our best-ever performance in FY22. 72 per cent of our saleable inventory was sold in the last financial year, an accomplishment made possible due to our customers’ immense trust and confidence in us. We are a proud pioneer of plotted development projects in the Bengaluru real estate market and have created landmark projects. Our plotted developments have stood out in the market and always performed well owing to our large format, theme-based approach. We currently have 3.1 million sq.feet. of area under construction and an additional 2.1 million sq.feet of residential projects nearing completion.
Elaborate on your expansion plans or upcoming launches and also on the additional investment for these plans.
We are charting a strong growth plan for FY23, which includes a steady foray into commercial real estate – with 2 million sq.feet of upcoming developments in the next 2-3 years. Self-development projects worth Rs 2,000 crores and joint ventures worth Rs 1,500 crores are in the pipeline. With this, we plan to unlock 10 million sq.feet. of prime land parcels. In residential real estate, we have over eight new launches coming up across the plotted, aspirational, and luxury segments. These include 1500+ units in the aspirational and luxury category, and 1000+ units in themed plotted development category.
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