Pandemic's Lasting Imprint on Indian Real Estate

The COVID-19 pandemic has had a profound impact on the Indian real estate market. The sector had already been through its transformative phase in the years leading up to 2019, with three major policy interruptions — demonetization (2016), introduction of the Goods and Services Tax (2017) and real estate regulatory authority (2016), the pandemic has accelerated some of the medium-term transformations that were largely expected to bring Indian real estate level with global best practices.

Despite the initial shocks, Indian real estate had begun to rebound, and it was widely expected that this would continue into 2020. However, with the advent of COVID-19, real estate was widely expected to go into a slump. Today, as we see things in hindsight, the Indian real estate market has shown resilience and recovered from the decade-old down-cycle.

The IT-BPM industry, India’s biggest occupier sector, maintained office gross leasing in 2020 and 2021 at levels similar to 2014-2019, thanks to its sustained revenue growth. Occupiers now value the total workplace ecosystem more than office rentals and building quality. Experiential retail, not just physical stores, is the new growth driver for retailers. The unorganized industrial spaces are losing out to organized sector operators, who are in higher demand. Data centers are emerging rapidly, fueled by digitalization and data localization. These growth opportunities have drawn the interest of institutional investors in the real estate sector. The maiden REIT listings in India have been successful and have boosted investors’ confidence.

The Indian real estate market has shown remarkable resilience in the face of the COVID-19 pandemic. The pandemic has accelerated some of the medium-term transformations that were largely expected to bring Indian real estate level with global best practices. The market has shown sustained revenue growth in India’s largest occupier segment, the IT-BPM sector, and has witnessed growth opportunities in the retail and industrial sectors. The emergence of data centers has also been a significant development. Growth opportunities in the real estate sector have naturally piqued the curiosity of institutional investors.