With the current emphasis on remote working, the value of owning a home has been re-established as a safe and necessary investment. Residential real estate demand in 2020 acted as a trigger for the recovery of the sector. Besides residential and commercial real estate; Warehousing, coworking spaces and data centers will be in the spotlight in 2021, according to Bijay Agarwal, Managing Director, Salarpuria Sattva, adding that companies looking to reinvent themselves and create out-of-the-box solutions to stay in touch with their stakeholders will triumph in the post-COVID era.
In an exclusive interview with Sanjeev Sinha, Mr Agarwal explains how real estate is coping with the changes of the time of the Covid pandemic and what the industry’s strategy is to stay in shape. He also shares his business perspectives and growth strategies. Excerpts:
COVID-19 has changed the way we work and live, and will have a long-standing impact on many sectors. How is real estate coping with these changes and what is its strategy to stay in shape?
The pandemic has changed our outlook on real estate. As we embrace new standards, especially in our workplaces and homes, the way we work has changed as well. The impact of COVID has also dramatically altered the feelings of consumers across industries and real estate is no different. With the current emphasis on remote working, the value of owning a home has been re-established as a safe and necessary investment. Residential real estate demand in 2020 acted as a trigger for the recovery of the sector.
We should expect the A-level office space to remain and the necessary steps to be taken to maintain physical distance and other precautions that are part of the new normal. Low interest rates and global liquidity have also contributed to an increase in real estate transactions. Besides residential and commercial real estate; warehouses, coworking spaces and data centers will be in the spotlight in 2021.
The sector has always been and will continue to be a haven for capital. However, the pandemic has taught us all to adapt and be nimble.
Have you witnessed new trends in the residential segment? Are there also changes in purchasing behavior?
In the last few months, the houses have been transformed into offices, classrooms for our children and a place to relax. At times like these, potential buyers seem to prefer multi-functional, gated communities and homes with additional amenities. There is a clear change in the importance of owning a home versus renting a home. Millennials who want to become homeowners are looking for home loans with attractive interest rates to invest in real estate. As a result, the demand for residential properties has increased.
Another key trend observed was the shift in strategic marketing efforts associated with innovative programs. In Salarpuria Sattva, we could see house sales doing even better than the pre-Covid period. Sales increased 20% compared to 2019 and showed a dramatic upward curve of 25% from June 2020, compared to the pre-Covid year.
What do you think about the increased demand for residential projects in Tier 2/3 cities in India?
The pandemic has caused people to return to their hometowns. This “reverse migration” has benefited real estate markets in Tier 2 and 3 cities like Indore, Kochi, Coimbatore, Ahmedabad, Jaipur and Mysuru, to name a few. This move would benefit not only small towns through rapid urbanization but also occupants who would benefit from the superior infrastructure available in these places. For this reason, there will be an exponential increase in demand from townships as well as commercial projects in Tier2 / Tier3 cities. This trend has opened doors of opportunities and new markets for developers and buyers to discover and develop in their hometowns.
What are the areas of intervention of your company and, in your opinion, which vertical is doing well – residential or commercial? What trends have you noticed in the two sectors?
The way people invest in real estate has changed due to the new normal. The residential market is booming as more and more people realize the importance of owning a home. Buyer preference has shifted mainly to affordable and mid-range properties in the residential segment, which has seen a pickup in demand growth. The luxury sector has recovered from the lockdown and continues to experience a fair rate of growth. This trend reiterated the need for space for work and play, prompting consumers not to compromise on home size.
Although commercial space has seen an increase in the pre-COVID period, due to the option of extended home working, office space occupancy has experienced a slowdown. Businesses looking to reinvent themselves and create out-of-the-box solutions to stay in touch with their stakeholders will triumph in the post-COVID era.
At Salarpuria Sattva, we focus on our vertical flexible spaces, Simpliwork, which is based on the “Built to Suit” model. We have been successful not only in retaining 100% of our customers in the long term, but also in securing new leases during the pandemic, which is truly exceptional.
What kind of growth do you foresee in trading, considering that working from home will last longer?
In the commercial work segment, companies that have invested in digital capabilities have seen great strides with remote work policies, which are expected to continue at least until the end of 2021. Developers are working on the renovation and the reuse of office spaces, to provide innovative solutions towards a more agile workspace. Design will play a crucial role in the spaces of the shared economy; coworking trends are likely to gain momentum, as there will be a dramatic shift in employee ratio, with flexible remote work opportunities.
Once things are normalized, there will be a greater demand for flexible rental agreements. This will push the demand curve up for the shared space. This upward trajectory of coworking spaces will increase the value of projects in this space. According to an industry report, the share of co-working spaces in office rental will increase significantly in the near future, as each office building may have a section designated for a co-working space.
Another business you’re planning and your growth strategies?
In Bengaluru, we plan to launch three new housing projects in the residential sector this year representing 1,200 units, including 500 plots. One of these projects is in the affordable housing category. In our commercial portfolio, we currently have 12 million square feet of land under construction and have other plans to begin construction of an additional 8 million square feet next year.