Rise in rent in post-pandemic era driving investment in real estate, boosting growth

The commercial real estate market in India is expected to reach new heights in the coming years. The sector has been the focus of investors in the post-Covid era. The growth in the sector is contributing to the overall growth and also creating employment opportunities. As a consequence of geopolitical uncertainties in the backdrop of the Russia-Ukraine war, the sector has emerged as the protector of strength which has given a boost to the economy.

The market has not only stabilised macroeconomic forces but also significantly mitigated the outflow of foreign exchange from the country.

According to the latest report by Anarock, rental hotspots saw better-than-expected growth between 2019 and 2022. It noted that the rental demand is increasing substantially as more companies are calling their employees back to the office, including in the hybrid mode.

Anurag Goel, director, Goel Ganga Developments, said that commercial properties not only provide remunerative rental returns over extended time frames but also become force multipliers by stimulating the growth of the real estate ecosystem. 

He said that commercial real estate is one of the most attractive assets in the real estate game and is set to see high returns as major IT companies are switching back to offices after Covid-19. E-commerce farms are also in a race to spread as widely as possible by expanding their warehouse and logistic operations.

He said that the rental demand is rising across the seven top cities "after plummeting during the two worst Covid-19 waves. We still recall the death knell being rung for the rental market in 2020.”

The Anarock report said that the rental demand will continue to head northward. The property demands are bound to increase in the coming years as the market rallies across a lifted market sentiment across all commercial asset classes. With an undulating high demand, financial experts are confident that the sector will grow at a CAGR of around 13 per cent in FY22-FY23. 

Notably, the real estate sector is time-tested and popularly believed to be immune to market volatility. The sector has remained faithful to the investor's expectations through the many ups and downs in the last couple of years. 

"Positive expectations and high rise have shown to sustain themselves and many experts do believe that it would continue like this in the coming year," Goel said.

Commercial real estate funds are also making their presence felt in the market as the idea of earning passive income from safe real estate investment has found a lot of excitement among investors.

The entire picture of the economy in 2023 displays an expected rise of 8-9 per cent as overall growth, an expected rise in jobs and a bounce back in the stock market, he said.

"All these would ultimately contribute to an increase in the demand for housing as more people would enter the commercial housing market which is something really important for the real estate economy. The government is also planning and implementing infrastructure mega projects such as highways, metros, new airports, etc as well as policies like housing for all and Pradhan Mantri Awas Yojna," he said.

"This shows how quantitatively and qualitatively there is an increase in commercial real estate assets," he said, adding that the most overbooked and passed-on tier-2 and 3 real estate markets stand to benefit the most from such positive developments and are highly likely to fetch investors handsome returns.

According to experts, the commercial housing market is the accelerator of growth and sustainer of the sector and is set to witness potentially its best year in the future. Residential sales are also up by 51 per cent during the post Covid-19 period.