Investors Eye Solid Returns From Real-Estate Rejig
The real-estate industry is getting a new-age spin with offbeat concepts, cutting-edge technology, eye-popping asymmetrical, fluid and rounded designs, plus a yet-to-be-penetrated market through contemporary property buyers, builders, architects and investors in both residential and commercial spaces.
We all crave for home sweet home. After all, home is where our heart is. Due to space crisis and sustainability issues cropping up, modern-day home building and architecture are palpably undergoing some healthy and responsible makeover.
While housing starts measuring new residential constructions are considered a key economic indicator, office buildings and business organizations too don’t lag far behind in booking a crucial berth to count on in the real-estate arena.
Brisk Business
The real-estate market seems to be booming all over. It is brimming with construction activity from metropolises to small towns, from business districts to posh uptowns. A point to ponder over is that how lucrative it is for investors who deal in buying and selling of properties (lands and buildings)?
“The current real-estate market is witnessing substantial growth and development in diverse areas, from major cities to smaller towns, spanning business quarters to upscale neighborhoods. In the last 10 years, India’s urbanization rate grew nearly 5% to reach 36% as it stands today, having impacted real-estate markets big time,” informs Rishabh Siroya, founder of Siroya Corp, a fast-emerging real-estate player. The company is part of the multimillion-dollar conglomerate Siroya Group.
Vijay Chaudhary, chairman of Ram Rattan Group (a name to reckon with in developing farmhouse communities), acknowledges the prosperity of the real-estate realm all over. “This industry presents profitable prospects for investors. A favourable environment for purchasing, and selling land and buildings is being created by skyrocketing demand for assets in different regions combined with historically low loan rates,” he reasons.
Architectural Beauty
Mammoth modern-day structures housing museums, art centres, sports complexes, cultural citadels, boutique hotels, stadiums et al with bizarre and innovative architectural designs are changing the city’s skyline. From avant-garde wall graffiti, decorative street and transport art to mural paintings — all are grabbing eyeballs everywhere. Is this slice of creativity amid urban clutter drawing investors with a cultural taste and an artistic bent of mind?
When quizzed if these splendid specimens in the heart of a town or a cosmopolitan city are driving the travel and tourism sector by attracting more tourists to the spots, Siroya readily replies in the affirmative: “The gigantic urban edifices and artistic installations are indeed wooing niche investors with a penchant for creativity.” The unique architectural wonders and urban art gems serve as not only landmarks but also cultural attractions, increasing a city's appeal to the trippers. They contribute to the tourism sector by luring in visitors seeking aesthetic experiences. Boutique hotels and cultural hubs in particular captivate travelers looking for unique staycations and enriching cultural encounters. “So, this fusion of art and urban development not only transforms a place but also bolsters its economic prospects by enhancing tourism and offering investment opportunities for those with an artistic inclination,” he insists.
Luxurious Lairs
The concept of luxe condominiums and well-furnished plush villas far from the madding crowd on sprawling swaths of land, at the seaside or with a riverside view and in the lap of nature is also gaining momentum at the moment. Considering that this is catered by builders and brokers to prospective owners of a high-end market, how do industry experts view its investment landscape?
“It’s true that the trend of luxury condominiums and tenements in serene, natural settings is seeing a noticeable rise, led by upmarket buyers looking for exclusivity and tranquility. The investment vista for such properties is generally promising, offering the potential for substantial returns. These developments often come with premium pricing, sweetening the pot for affluent investors,” reveals Siroya.
The charm of scenic locations, top-tier amenities and the assurance of a relaxing lifestyle can bump up property values over time. “However, it's essential for investors to carefully assess the mutable market conditions, site desirability, and the credibility of builders and brokers to ensure that their hefty investments in this cost-intensive market segment align with their financial goals and risk tolerance,” he cautions.
According to the latest report from Anarock (a well-known international property consultant that delivers comprehensive real-estate services to a large and diversified client base including developers, corporates, financial institutions, governments and individuals), the number of unsold luxury units in the Rs 2,500-crore range dropped 24% in March 2023 to 15,520 units from 20,480 a year ago. The total unsold inventory in the same segment stood at around 23,130 units in March 2019.
“One of the main reasons for investing in lavish properties is the location. Swanky properties not only offer stunning views of nature but also a sense of safety amid a secure environment. Plus, they provide a good investment potential that can pay off in the long run. The convenient location in a centralized or easy-to-access area is a bonus. All in all, investing in any kind of indulgence, leisure vacations or an extravagant property is becoming more and more popular and showing a lot of possibility for growth,” explains Rohit Gupta, CEO of Mantra Group, a top real-estate company operating in the Pune and PCMC markets for more than 16 years.
Home Meets Office
With hybrid and work-from-home models having gathered steam since the COVID breakout, many people have already shifted offices to their residential abodes and visit workplaces occasionally. One may think if professionals are nowadays consciously seeking specific properties that will flexibly accommodate a home-cum-office set-up creating a work-friendly ambience to maintain work-life balance and save commuting time too.
“Many office personnel aggressively hunt such convenient homes within the walking distance of their residential area. This parameter should eliminate long shuttling hours and help elevate performance efficiency. Moreover, such arrangements offer employees a dedicated workspace within their living radius,” concedes Pratik Potnis, a co-founder and the CEO of TRIOS, a leading smart coworking space company headquartered in Pune, Maharashtra.
Convention Embraces Contemporary
When traditional festivals and historical monuments get a heritage tag from UNESCO, their popularity soars automatically. Does an amalgam of customs, antiquity and modernity tickle investors’ curiosity to place their bets on such period treasures in terms of preservation and renovation?
“Absolutely! For instance, the Express Estates, widely renowned as the iconic Old Madras Club, founded in 1832. It is the birth place of the old Indian Express print media, making it part of one of the iconic heritage sites in Chennai. To give an investor a pulse of heritage, what better option could one ask for in the heart of the Chennai city where classic era blends seamlessly into new age,” shares Kavita Singhania, MD at Express Avenue. For the unversed, Express Residences, a prominent name in the Chennai real-estate space, is the builder of the Express Avenue Mall.
Under the Same Umbrella
One-stop destinations like shopping malls with multiplexes, bookstores, cafes and restaurants as well as residential complexes in a gated community with offices and other commercial establishments have long been dotting the cityscape. Does this type of projects act as a financial feeder for real-estate dealers as these may reap greater revenues?
From a realty perspective, these multifaceted projects serve as chief sources of cash injection for real-estate dealers. The appeal of browsing variety under a single roof lies in its tapestry of lifestyle offerings, inviting distinctive tenants and buyers.
“Such integrated developments cater to the modern consumer's aspiration for a holistic living experience where essentials, entertainment and workspaces are all within one’s easy bounds. This convenience translates into steep demand, ensuring a steady flow of retail brands and stores,” argues Anoop Kumar Bhargava, CEO and director, Empire Centrum, a business division of Empire Industries listed in BSE.
Additionally, these convergence projects often create a sense of exclusivity and security, further enhancing their market value. “The miscellaneous revenue streams generated by all-encompassing mixed-use developments in today's urban real-estate market make them enticing and lucrative investments,” he assures.
Singhania says: “These blended project developments not only lend real-estate professionals with a multipronged approach to revenue generation but also meet the evolving demands of globally-exposed consumers who seek convenience, a range of amenities, remarkable financial returns and most importantly, a personal corner,” she highlights.
Market Forecasts
The real-estate sector has been a crucial growth engine in India's economy. As per industry sources, the current contribution of the Indian real-estate market to the country’s GDP stands at 8%. “The figure is expected to shoot up as the nation hurtles towards becoming a $10-trillion economy. The industry plays a crucial role in job creation, infrastructure development and foreign direct investment,” reports Ashish Kukreja, founder & CEO, Homesfy.in, India's first listed tech-led real-estate brokerage platform with its presence in top four cities.
Reflecting on the market size of real estate, Chaudhary echoes that the relevant industry accounts for roughly 6-8% of India's GDP, covering a substantial portion of its economy. “Although the worldwide real-estate market is believed to be way more inflated, its size actually differs by country and is dependent significantly on the regional economic circumstances,” he argues.
Gupta responds that “the real estate is one of the largest and the most important sectors in the Indian economy, representing about 11% of gross value added (GVA) growth since 2011-12. It is also the second-largest employment generator after agriculture. Reliable sources suggest that the Indian real-estate market is expected to touch $1 trillion by 2030, accounting for 18-20% of India's GDP. This apart, the overseas real-estate market is estimated to be worth $326 trillion in 2023 and is envisioned to reach $450 trillion by 2030, seeing a CAGR of 5% during the forecast period.”
Ergonomics Edge
Office ergonomics is given much importance these days, right from incorporating comfortable furniture, green cover, adequate passage of air and light to creating lounge areas for free movement and also including eco-friendly zones for the staff to work smoothly and with enhanced efficiency levels. The common query over here is that how profitable these sustainable properties (keeping the impact of climate change and global warming in mind) are in terms of investment.
“In my experience, investing in modern and sustainable properties that prioritize working environment and people’s operational efficiency could be profitable in the long run. In case of commercial properties, particularly property developers and coworking space companies are increasingly becoming aware of trends like flexibility, sustainability, health and wellness. In the post-pandemic era, these trends got an added impetus and saw widespread implementation,” views Potnis.
Adding adequate ventilation and lighting, plus making room for lounge spaces can provide a more productive environment for employees. “As a coworking space company, we have always noticed that eco-friendly properties can boost employee satisfaction, reduce absenteeism and augment their productivity ratio, thus benefiting companies in the end,” he agrees with a hint of recommendation.
Functional Creations
More often than not, it is enquired if functional architecture like aqueducts or waterways plus bridges for rapid and uninterrupted communication can add substantial value to the urban real-estate sector as it is integral to a city’s basic and essential infrastructure. To this query, Gupta’s reaction is: “The value of urban real estate gets a great elevation by the presence of infrastructure. Waterways and bridges are particularly valuable. Waterways not only add to a scenic spot’s sightseeing beauty but also perk up a local property’s worth by offering a sale price premium.”
“Investing in functional architecture can be an excellent way to amplify the value of an investment. It can help expand the marketability of a property in concern, attract more potential buyers or renters, and increase the overall value of the property,” opines Amol Ravetkar, founder and managing director of Ravetkar Group, a name to reckon with in the real-estate domain. Additionally, functional architecture can turn a place into a more habitable and enjoyable one for its residents. “That is why it is so important to contemplate pumping resources into functional architecture while investing in urban real estate,” he chips in ahead.
Greenfield Challenges
In greenfield projects, often the soil on which the property is supposed to get constructed along with the available surrounding resources can prove to be unsuitable or limited for basic civic facilities to access by the future habitants. In that case, could such projects become hazardous for investors and property developers as many are located in the suburbs or in the outskirts?
“For investors and real-estate developers, greenfield ventures in regions with poor soil or restricted resources can pose serious risks. Locations in the fringes or on the periphery can lack necessary infrastructure and services, which could make the project less feasible and less tempting to potential buyers,” warns Chaudhary. It could also run into financial losses induced by construction delays, cost overruns and difficulties in obtaining relevant clearances. Thus, the investment is more vulnerable since market demand and property values in these places could be unpredictable. “To ward off such possible dangers, careful due diligence and risk-mitigation methods are essential,” he advises.
Legal Rows
In the case of brownfield projects, often the real-estate agents or promoters evict the present occupants or illegal encroachers from the premises to be bulldozed and rebuilt. There then lies the onus to rehabilitate the ousted occupants. Often local political interference affects or delays such projects. The builders sometimes also have to cough up a lump sum to advance the project. These external problems certainly become a cause for worry for property dealers and investors. One wonders how realtors can overcome such legal hassles.
“The structures or encroachers need to be removed from brownfield projects to vacate the land and develop the same. However, many a time other issues like land contamination owing to past industrial/commercial activities rear their heads as a huge hurdle for implementing such projects. The land identified for brownfield projects will have complexity in terms of its ownership. Unfortunately, there is no law like the SRA (Slum Rehabilitation Act), which protects encroachers/slum dwellers and simultaneously dispenses incentives to the developer for executing slum rehabilitation schemes,” states Sadhav Mishra, partner at the law firm SNG & Partners, Advocates & Solicitors.
The legal wrangles are an unwarranted hindrance to such projects. “To clean up this mess and pinpoint the flaws, the developer needs to do complete and detailed due diligence on the land. Once the irregularities related to ownership, environmental laws and pending liabilities are identified, they must be redressed and complied with on the expert guidance of a legal counselor,” he suggests.
Return to Nature & Adventure
Many senior retirees or adventure-thirsty people prefer to go and settle in the hinterlands or nearby farmlands or in extreme climatic conditions. Does this segment of farmhouse communities unlock any significant value for the real-estate builders? “Definitely, the trend of aged citizens in their retired life and adventurers (with a yen for wilderness, mountain biking, trekking and adventure sports) relocating to rural areas, farmlands or regions with harsh weather can provide real-estate developers with a lot of potential. This may create niche markets. By targeting these groups, builders can seize new opportunities and possibly command higher pricing, solidifying their general profitability and competitive market presence,” expounds Chaudhary.
“Old people choosing remote retreats to spend the remainder of their lives or adventure-seekers with wanderlust opting for treacherous terrain and inclement weather to nurture their hankering for daredevilry may surface as an untapped segment of target customers, doling out substantial value for the real-estate builders,” Gupta raises hope.
In this scenario, the prospective landowners or property purchasers are mostly looking for a unique and different experience. “By building properties in far-flung territories, real-estate builders can unleash an unconventional experience for a seldom-explored segment of the market. This appears a prudent ploy to bump up sales and reap additional value,” he further infers.
Pack Your Home in a Box
Due to lack of enough open space and excessive urban congestion (which could be a threat to biodiversity and the verdant environment), architects are now coming up with out-of-the-box designs like cubes or foldable tent-like homes or floating and moveable houses with minimal square foot area and useful storage to bring a solution to this issue. Is this gradually setting a trend in real-estate business?
“The emergence of innovative architectural shapes and patterns reflects a strategic response to the headwinds posed by urban clogging and space crunch. As a realty expert, I observe this trend as a pragmatic solution to the growing problem of space scarcity in cities and the adjoining areas,” corroborates Bhargava.
“The avant-garde designs optimize minimal square foot areas, ensuring efficient utilization of space. While these concepts are currently addressing specific issues, they also present a glimpse into the future of real estate. As urban sites continue to expand and land becomes sparse, embracing alternative housing solutions could indeed bring a revolution in the real-estate business. The adaptability and creativity displayed by architects in their modern marvels are indicative of a shift towards more flexible and sustainable living spaces, reflecting the evolving needs and preferences of current-day homebuyers,” he elaborates. The trend has the potential to redefine the real-estate landscape by resolving space issues faced in densely-populated urban cluster settlements.
Keeping the environmental concerns in mind, creative architectural ideas with minimal space, such as hanging, aerial and tree houses; portable and convertible homes; floating and underground dwellings or basement living are becoming more and more fashionable nowadays. “As they maximize space economy and adaptability while addressing dearth of biodiversity and lack of sufficient green spaces, they evoke unusual answers to get rid of problems in the real-estate market,” volunteers Chaudhary.
Smart Living
Town planning has become an intrinsic element of smart cities in today’s India. Modern-day townships see town planners coordinating with architects, public works department, local administration and realtors to draft in interesting as well as unique designs of planned and emission-free towns. Does this kind of projects add a sense of social and environmental responsibility to the real-estate sector and also help boost business prospects for the realtors?
The integration of town planning in the development of smart cities in India marks a pivotal shift in the real-estate sector. I think such projects signify a positive paradigm change, embedding social and environmental responsibility within the industry.
“By collaborating with town planners, architects and local authorities, real-estate developers are not only creating aesthetically-enchanting spaces but also ensuring sustainability and carbon-free environments. These efforts resonate with the growing environmental consciousness of buyers, enhancing the market position of properties. Moreover, planned townships foster a sense of community and well-being, aligning with the social needs of residents. Embracing eco-friendly designs and energy-efficient infrastructure not only demonstrates corporate social responsibility but also reins in long-term operational costs, making these projects economically plausible,” inputs Bhargava.
Going by the distinguished Swiss company IQ Air’s report that India was ranked as the eighth most polluted nation in the world during 2022, it is clear that the country improved from its fifth place recorded in the prior year.
Digital Habitats
Veering the conversation to the performance of online brokerage platforms in India, Kukreja adds: “Online brokerages are thriving as they effectively cater to the needs of modern buyers and bridge crucial gaps. Of the total transactions, bulk portion is conducted via brokers, with the majority routed through virtual brokerage platforms. In the fiscal years 2020 to 2023 so far, the Indian real-estate housing market has almost doubled.”
The widespread adoption of online brokerages or real-estate agents visibly underscores consumers' keen preference for the digital approach. “The real-estate industry is undergoing a notable transition from unorganized brokerages to a more structured and organized landscape,” he apprises.
The property websites (like Magicbricks.com, Makaan.com or 99 acres.com) are wooing prospective buyers who are either looking to purchase properties/lands as owners or take the same addresses on rent. How the real-estate market is faring over there is a pertinent question.
“Most well-known property websites operate as online portals and classified platforms, serving as intermediaries rather than facilitating real-estate deals and trades directly. These platforms actively target potential buyers interested in property purchases or rentals,” ascertains Kukreja. The same offers a wide range of property listings, making it convenient for both buyers and renters to find suitable options.
Leisurely Retreats
Many realtors are into building amusement parks and revamping the old and neglected national parks to attract tourists in droves. Is this area hot in the real-estate scene?
“With many realtors getting into the business of constructing amusement parks and restoring the old national parks lying in bad shape, there is certainly some sturdy potential visible in this zone for the real-estate investors. I believe that this particular prospect can be a source of steady and consistent income streams,” observes Ravetkar.
Recreational parks can be a great revenue churner for investors and quite a draw for tourists and visitors. “The key to success when investing in this type of property is to identify the right location and create a unique experience for the guests and revellers trooping in. This can be done by dishing out unique attractions, offering great amenities and providing a high-quality package of customer services,” he advises.
Cramped but Comfortable
The concept of duplex and 1BHK flats has over the years become a fad among bachelors, pupils, working professionals, nuclear-family units as well as performers and artists looking for creative corners like an art/photography studio, woodshed for the musicians and a writer’s secluded cave. Is this helping home builders and agents in the real-estate market?
Vijeth Reddy, co-founder and CEO of Kots, a pioneering residential leasing company operating in East Bangalore muses on the 1BHK fad: “Usually, 2BHK and 3BHK have been the top performers in the residential real-estate market for a considerable period of time as they were more spacious, acted as a reasonable investment bet with growth in the family headcount and also became a viable option for both youngsters and settled families. However, in the past five years, the sales and preference of 1BHKs have risen drastically. A-1 cities like Delhi, Mumbai and Bangalore saw a steep jump in the volume of 1BHKs sold. This conspicuous change was anticipated due to the shift in buyer demographics as the average house buyer’s age in India slipped to around 30 years and 1BHKs being an affordable option are having high traction among the home buyers.”
Funding Options
The primary financing options for real-estate investments encompass equity, debt, quasi equity, structured debt and leasehold revenue discounting (LRD). “Equity involves personal or investor funds as ownership stakes, sharing profits and risks. Debt involves property-backed loans. Quasi equity combines elements of both debt and equity. Structured debt offers tailored loan arrangements. LRD leverages future lease income for financing, making it suitable for income-generating properties. These options provide flexibility for investors to align their real-estate investments with financial goals and risk tolerance,” elaborates BM Jayeshankar, chairman and managing director of Adarsh Group, a premier Bengaluru-based real-estate firm.
Economic Upheavals
Changing economic conditions, such as inflation or recession, affect the financing climate of real-estate investments. “The funding of real-estate investment is intricately tied to supply and demand dynamics, which directly impact the borrowing rates. When demand for real-estate investment is high, lenders are typically more inclined to offer competitive financing terms, driven by the probability of profitable returns in a thriving market. Similarly, during low demand or economic uncertainty, lenders may adopt a more careful approach, imposing higher interest rates and stricter lending criteria,” depicts Jayeshankar in detail.
Various external factors, such as central bank interest rates, prevalent economic status and bullish/bearish investor sentiment further govern the financing landscape's fluidity. “Therefore, real-estate investors must remain vigilant about these market forces to make informed decisions and adapt their financing strategies to suit the existent scenario as well as maximize their investment frequency,” he lays an emphasis.
