Nexus Select Trust, the retail-focused real estate investment trust sponsored by global private equity giant Blackstone, has signed a preliminary agreement to acquire three malls from Larsen & Toubro in Hyderabad for around $300-350 million, sources said.

The malls under the brand name ‘Hyderabad Next Galleria Malls’ are located at strategic metro stations and have been developed by Larsen & Toubro as part of the ecosystem to transform the shopping and entertainment experience in the city.

There are four malls under L&T along the metro line with a total leasable area of 1.2 million square feet. Nexus has signed a deal for three of the malls with a total area of 1 msf and with a leased occupancy of 84 per cent.

The three malls that are likely part of the deal are e-Galleria located next to Hitec City metro station and with an area of 2 lakh square feet, Next Galleria Mall at Punjagutta Metro and an area of 5 lakh square feet and Premia next to Irrum Manzil station.

Nexus Select Trust and Larsen & Toubro did not respond to requests for comment on the deal.

The acquisition of these malls will take Nexus Select Trust’s portfolio to around 11 msf of retail portfolio. It has only signed a non-binding term sheet and the final transaction will depend on the pricing and valuations.

All the malls have a good tenant base with Reliance Trends as an anchor tenant and PVR-INOX, the multiplex operator tenant.

This is not the first deal that Blackstone has done with L&T. In 2017, it had acquired Seawoods Mall in Navi Mumbai from the engineering and construction major for over ₹1,300 crore. At around 1 msf, it is one of the largest retail properties in the REIT’s portfolio after Nexus Elante in Chandigarh.

The gross asset value of Nexus Select’s retail portfolio was ₹21,924 core at the end of September 2023 with an occupancy of 97 per cent. It also has three office assets in its portfolio and two hotels.

In the first half of FY24, the REIT reported a net operating income of around ₹600 crore on revenue of ₹815.6 crore, of which the retail portfolio’s contribution was ₹726 crore.

Niranjan Hiranandani, Founder and MD of Hiranandani Constructions, which builds residential and industrial townships and commercial office spaces, is calling for building a huge stock of “rental houses”, so that people in the lower strata of society can live at affordable rents. 

In a conversation with businessline, Hirananadani said that the government should incentivise companies so that the companies could build rental houses — perhaps by giving a five-years income-tax exemption on rental incomes. This, he said, should be applicable for houses below a certain size, say, 60 sq meters. 

Elaborating on the idea, he said that today houses are built with the owner in mind, though many of them are rented. Rental houses, on the other hand, are accommodations that are meant to be rented out — so, they are built accordingly. “During the British days, there used to be chowks in Mumbai, which used to rent out houses for (say) ₹10 a month — with common bathrooms and toilets. We need to bring them back,” he said. 

A worker or a peon in an office should be able to quickly get a house on rent and live there. “Today, he can’t — he lives in a jhompda (hutment) or something like that,” Dr Hiranandani, who is also the Chairman of the National Real Estate Development Council, said. 

He said that if there were incentives, any company could build rental houses for their workers. Given incentives “Reliance, Hiranandani, HDFC, banks and financial institutions can all build rental houses,” he said, stressing that the multiplier effect of this would enable economic growth of 10 per cent. “In the US, which is the richest country in the world, 50 per cent of the people live in rental houses,” Dr Hiranandani said. 

Giving an example, he said, “today you have many factories in Oragadam (an industrial township near Chennai, where Hiranandani is building several residential complexes). There are 25,000 workers there. You can build 25,000 rental rooms.” 

But could this not be done without incentives? “Who wants to block the money?” he posed. A builder would want to build houses and sell them. To hold them for rent would be to lock in capital. 

Asked if the Council had formally given this suggestion to the government, he said that it had, and the government was “considering” the idea. He said that if building rental houses were to become a movement, “at least $20 billion per year of foreign capital will come into India.” 

Huge employment potential 

Hiranandani said that the housing sector was the second largest employment provider, after agriculture, and provides business to 270 feeder industries — cement and steel, paints, wood, flooring, tiles and so on. 

He feels that in the next year, India’s GDP will grow at 8 per cent, thanks to all the infrastructure development. If India must get to double digit GDP growth, it has to focus on housing, he said, pointing out that the Government of India’s think-tank, Niti Aayog, had said that when India becomes $5 trillion economy, housing would account for 20 per cent of GDP. Today, it is 7 per cent. 

Cushman & Wakefield (C&W) and Nuvama Asset Management have formed an equal joint venture to set up a ₹3000-crore platform that will invest in office projects.

The Prime Offices Fund, slated as a six-year close-ended fund, is anticipated to launch in approximately six months, pending approval from the Securities and Exchange Board of India (SEBI).

“The platform that we intend to build will create great solutions for Indian investors,” said Anshu Kapoor, President, Nuvama Asset Management. The platform will have the fund management expertise of Nuvama and C&W’s expertise as a consultant in the commercial real estate sector. “Indian investors do not have access to this asset class,” he said, adding that it is a $100-billion opportunity that would double in 10 years.

• Also read: Office space demand in Chennai is expected to grow amid supply overhang

The fund aims to attract high-net-worth individuals and family offices for fund-raising purposes. Assets are being identified in the top six cities: Bengaluru, Delhi, Pune, Mumbai, Chennai, and Hyderabad. Kapoor said that initial investment would be in around five to seven assets and investment in each would be in the range of ₹500-1,000 crore. “We are working on the deal pipeline,” he said. Investments would be in under- construction as well as fully leased assets. The expense ratio would be capped at 30 basis points.

Kapoor said that the two companies are in it for the long haul and once the current fund had provided an exit for its investors at the end of its tenure, another and larger fund would be set up. Most of the office space in India is in the hands of foreign institutional investors such as Blackstone and Brookfield, and the Prime Office Fund would attempt to challenge that dominance.

• Also read: India’s office sector anticipates 20–22% y-o-y growth in 2024: report

The platform has been in the works for about a year, said Anshul Jain, Managing Director, India and South-East Asia, and Head of APAC tenant representation at C&W. He noted that despite uncertainties and occupancy challenges, the Indian office market notably absorbed 41 million sq ft last year.

High-quality offices are being built and stock worth over ₹8-lakh crore will be added over the next 10 years in India.

Chennai-based Aarin Hospitality has launched Apartel, luxury serviced apartments, at Hiranandani Parks, Oragadam, near Chennai.

Launched in partnership with Hiranandani Residences, Apartel Oragadam, which was inaugurated by Niranjan Hiranandani, Co-Founder, Managing Director, Hiranandani Group, seeks to cater primarily to expats, business executives & business travellers. 

It will feature 1, 2, and 3 BHK apartments, ranging from 900 to 1700 sq ft.

Apartel will offer a home-like ambience and serve as an alternative to hotel accommodation, according to a statement. 

“Apartel Oragadam provides a home away from home experience, offering a sense of community along with luxurious amenities. It offers what a business traveller looks for — modern amenities, ample space, and privacy – in a modern integrated township,” said Samvel Sathyan, Founder, Aarin Hospitality.

Apartel’s serviced residences are available weekly and monthly, providing budget-friendly options for both corporate relocations and extended visits. With over 150 keys across their two properties, the company aims to expand to 3,000+ keys and employ 1,200 staff by 2030, it said.

Other amenities in Apartel include a gym, and a global-cuisine restaurant where you can indulge in authentic local cuisine.

Aarin Hospitality plans to expand its presence across Chennai, Bangalore, and Hyderabad as it sees rising demand for premium serviced residences.

The current calendar year is expected to close with office demand or absorption of 55-57 million square feet, much lower than the 70 million square feet seen last year, but higher than initially anticipated because of the subdued sentiment in the office market in the first half of the year.

In the first nine months of the current year, office demand was at 42 msf, and the last quarter is seen adding 13-15 msf, according to a report by industry body, the Confederation of Real Estate Developers’ Associations of India and market intelligence platform CRE Matrix.

After a subdued start to the year, leasing activity picked up in the third quarter, with demand up 29 per cent sequentially, aided by supply that grew 35 per cent. The supply in the first nine months of the year in absolute terms was close to 40 msf.

‘India to see explosion in demand for office space in 12-18 months’

However, despite the optimism, uncertainty looming over office take-up is reflected in the vacancy numbers that have shown a distinct uptrend since the middle of last year. In the third quarter of 2023, the vacancy level was at 17.4 per cent, up from 16.9 per cent a year ago. Hyderabad had the maximum vacancy at 25.7 per cent, and Bengaluru the least at 8.3 per cent.

In the first nine months of this year, office demand has touched 42 msf, with Bengaluru contributing about a fourth and Delhi-NCR about a fifth. Despite the information technology sector facing stiff headwinds, about two-thirds of the demand for office space still came from this sector.

The total grade A stock on a pan-India basis is currently at 770 msf, and another 257 msf under construction will take another three years to come into the market.

Bengaluru and Hyderabad contributed roughly half of total demand in the third quarter, and 57 per cent of to the total supply.

Puravankara Limited’s subsidiary, Provident Housing Limited, introduced a scheme to support serving and retired armed forces personnel in acquiring homes. The company will provide a special 2% discount on housing across its projects for eligible armed forces personnel.

With a focus on mid-segment housing, Provident Housing aims to assist the approximately 1.4 million serving personnel and 2.6 million veterans in India. The initiative, designed to express gratitude to the armed forces, was formally communicated to Major General Ravi Murugan, AVSM, General Officer Commanding (GOC), Karnataka and Kerala Sub Area.

Mallanna Sasalu, CEO of Provident Housing, highlighted the company’s forward-looking approach and the desire to show respect for the protection provided by the armed forces. The eligibility criteria encompass all serving and retired members of the Army, Navy, and Air Force, along with their spouses and children, and officers of the Short Service Commission who have completed full tenure. Individuals with less than five years of service are excluded from the scheme.

The shares were down by 0.99 per cent to Rs 185.55 at 12.56 pm on the BSE

Realty firm Sobha Ltd reported a 37 per cent increase in sales bookings at ₹1,951.6 crore in the third quarter of this financial year, mainly on the back of strong housing demand in Bengaluru.

• Also read: Puravankara reports net loss of ₹11 crore in Q2

Its sales bookings stood at ₹1,424.7 crore in the year-ago period.

“The Q3 (third quarter) of this financial year has been the best-ever sales quarter for Sobha,” the company said in a regulatory filing late on Thursday.

The average price realization improved to ₹11,732 per square foot during the third quarter of this fiscal year, from ₹9,653 per square foot in the year-ago period.

Sales bookings in volume terms also increased to 16.63 lakh square foot , from 14.76 lakh square foot during the period under review.

“Bengaluru has achieved its highest ever quarterly sales of 1.25 million square feet with a value of ₹14.99 billion, led by the successful launch of the Sobha Neopolis project in the beginning of the quarter,” the company said.

• Also read: Ramco Cements reports big increase in Q2 profit at ₹101 crore amid pricing pressures

Sobha highlighted that the Delhi-NCR region continued with its strong momentum completing the sale of Sobha City in Gurugram.

“We launched two new projects in the third quarter with a total saleable area of 3.84 million square feet. Cash flows for the quarter remained strong and has resulted in further net debt reduction,” Sobha said.

Knight Frank’s India Real Estate 2023 report stated that Pune’s residential market witnessed 13.5 per cent sales growth year-on-year, with 49,266 housing units sold during the year. The weighted average price of residential units in Pune increased by 5 per cent YoY to Rs 4,507 per sq ft.

In the case of office spaces, the January to December 2023 period saw 9 per cent growth in transaction volumes at 6.7 million sq ft, the highest till date. Rentals increased by over 5 per cent. New office completions fell by 46 per cent YoY to 3.6 million sq ft. Completions are expected to improve in the coming months. Global capability centres accounted for 49 per cent of office space transactions.

In 2023, Pune’s real estate market displayed continued growth, recording the best residential sales since 2013, according to the report. A considerable segment of homebuyers in Pune consists mainly of migrant workers, particularly salaried individuals seeking housing mortgages. Despite the elevated home loan rates, the outlook remains optimistic. There were new launches of 42,437 residential units, up 10 per cent YoY.

Vilas P Menon, National Director, Occupier Services, Capital Markets and Branch Head, Pune, Knight Frank India, said, “Pune’s real estate market witnessed continuous growth in 2023, fuelled by improved market sentiment. The city’s evolution as a thriving IT hub, bolstered by the government’s continued infrastructure development, has firmly established Pune as a pivotal housing destination. The notable uptick in property sales above Rs 1 crore reflects rising buyer’s confidence. The city’s emergence as a thriving IT and ITeS hub, coupled with the government’s emphasis on infrastructure development, positions Pune as an emerging housing destination.”

In 2023 office absorption came near an all-time high at 59.6 million square feet, while residential sales at 3.3 lakh units set a new 10-year record, according to a report by Knight Frank India.

• Also read: Office sector dominates: Indian real estate attracts $5.4 billion in institutional investments

Transactions in the office sector rose 15 per cent on year but fell short of the record 60.6 msf seen in 2019. Residential sales rose five per cent on year. The data pertained to the top eight cities in India.

Office Sector

The office sector started the year on a subdued note and remained so for most of the year as multinational office occupiers were still making up their minds about taking up office space. The slowdown in the information technology sector dented demand, as they have been accounting for a significant volume of office occupancy so far.

Domestic companies have, however, taken the slack resulting in better-than-expected office leasing volume in the year.

The performance of the office market is reflective of the strong occupier activity, said the Knight Frank report. Bengaluru remained the largest market by volume leasing over 12 msf in 2023, followed by Chennai with 10.8 msf and the National Capital Region at 10.1 msf. Chennai also recorded the strongest annual growth of 92 per cent. Bengaluru saw a decline in leasing volumes.

The office market witnessed 42.9 msf of office space completions in 2023.

Rents firmed up across all markets encouraged by demand and a relatively contained supply. Kolkata led the rental growth at 11 per cent, followed by Bengaluru at seven per cent.

• Also read: Office space demand in Chennai is expected to grow amid supply overhang

The physical occupancies have steadily increased across markets at 57-65 per cent levels in the REIT portfolios, compared to 47-55 per cent last year. The vacancy levels decreased by 94 basis points over last year to 16.1 per cent in 2023.

Office space transactions by India-facing business and Global Capability Centres (GCC) were recorded at 21.9 msf and 20.8 msf, respectively.

“The impetus behind India’s recent dominance in office absorption is attributed to its strong economic fundamentals. The forthcoming year is poised for steady expansion, and 2024 promises to be a standout year for the office market, driven by India-facing businesses and GCCs,” said Knight Frank India CMD Shishir Baijal.

Residential sales, launches

On the residential side, Mumbai was the leader in residential sales in 2023 with sales of 86,871 units, followed by the National Capital Region at 60,002 units and Bengaluru with 54,046 units. These three cities together constituted 61 per cent of the total residential sales during the year.

The renewed demand has led to an accelerated pace in residential development, with both half-yearly and annual volume of units launched reaching their highest levels in a decade, said the report. New home launches witnessed a rise of seven per cent in 2023 with the addition of 3.5 lakh units.

The launch volumes in 2022 and 2023 have surpassed the sales figures for the corresponding periods, a phenomenon that has occurred only thrice in the past ten years.

Mumbai recorded highest residential launches in the country with supply of 93,051 units during the year. Kolkata witnessed the highest growth at 28 per cent followed by Bengaluru at 18 per cent. NCR was the only market to record a marginal slowdown in launches.

Chennai market is likely to witness an addition of about 14 million sq ft (msf) in office space in the next two years amid slow growth in demand, say industry analysts.

The supply in the office space segment has been outstripping absorption across the country over the past few years. 2023 witnessed some moderation. However, incremental supply is likely to be higher.

“In Chennai market, supply of about 14 msf is anticipated over the next two years (2024 and 2025), half of which would come up in the peripheral South and suburban South micro-markets,” said Parvez Qazi and Vasudev Ganatra, analysts of Nuvama Institutional Equities, said in a report.

The December 2023 quarter witnessed the highest-ever demand for office spaces in India, with all three southern cities of Bengaluru, Chennai, and Hyderabad registering the best performance since the pandemic.

Leasing demand is expected to increase in Chennai supported by robust enquiries from the IT-BPM sector and an increase in the supply of Grade A office space. The absorption of office space is likely to be higher in 2023 and 2024 than the annual average demand over CY15–19.

Cushman & Wakefield has projected a total new supply of 17.5 msf during 2023-2025. “A little over one-fourth of the upcoming space is pre-committed mainly by BFSI and IT-BPM sectors,” it said.

Net absorption for 2023 and 2024 are estimated at 2.45 msf and 2.5 msf respectively, largely driven by IT-BPM sectors.

Vacancy levels

Vacancy levels in India had reached 18.1 per cent in the September 2023 quarter due to supply eclipsing demand post-CY19. Hyderabad is likely to witness the highest growth in vacant office space, followed by Chennai. With the rise in vacancies, annual rental growth in Chennai is likely to be constrained (1–2 per cent).

“Amid an increase in vacancy levels from 18 per cent in 2023 to 24 per cent in 2025, the Chennai office market is expected to experience robust demand, particularly from the IT-BPM, engineering, manufacturing, BFSI and flexible workspace operator segments,” said Cushman &Wakefield.

Most cities need a significant uptick in demand for absorption of upcoming supply. Chennai, particularly, may struggle given about 14 msf of upcoming supply by CY25 against about 2 msf demand. Bengaluru and Hyderabad are also in the same boat, wherein 32–36 msf of supply is expected to come on stream by CY25 in each city.

Recruitment momentum in the travel and hospitality sector will continue in 2024.

According to TeamLease Services, the coming year will witness increased hiring in the travel and hospitality by 15 – 20 per cent, as compared to 2023. This surge is particularly evident in the fourth quarter of fiscal year 2024, with an expected uptick of 68 per cent compared to the preceding quarter.

• Also read: Travel, hospitality, restaurant industries witness uptick of 11.7% in credit deployment in Oct: RBI data

On the hospitality front, major hospitality players including Indian Hotels Company Limited (IHCL), which operates Taj Hotels, said it plans to add 20 hotels across its brands in cities like Patna, Nagpur, Puri, Udaipur, Bhutan, Goa, Gurgaon, and Cochin. Another listed player Lemon Tree Hotels is likely to have 20 openings expected in CY2024, in India, Nepal and Bhutan. Accor has a pipeline of five hotels in the coming year. Marriott International, with a pipeline of 60-plus hotels in the next few years, and Wyndham has a pipeline for adding 40.

A report by hospitality consultancy firm Hotelivate stated With a base of ~ 1,65,000 branded and organised rooms operating in India, another ~ 70,000 new rooms were signed and planned as of 31st March 2023. Of these, about 79 per cent are actively under development and are likely to open for business over the next 60 months. That amounts to a 33 per cent increase in supply on the existing base over the next 4-5 years. 

Covid-19 had pushed the construction of several hotels over the past two years. The cascading effect was visible in 2023. IHCL opened 20 hotels, whereas Accord added six new properties in 2023. Lemon Tree added a 23 per cent higher room inventory to its hotels in 2023 alone. According to industry experts, the Indian hospitality sector witnessed the highest room addition in 2023.

• Also read: Hotel rooms in North East states rise 2.5x as brands check in

The impact of this could be witnessed on hiring as well. According to a report by ‘foundit’ (formerly Monster.com) there were 44 per cent higher listings for jobs in the travel and hospitality sector compared to 2022.

TeamLease believes that this strong churn of hiring will continue in the last quarter of FY24 ending on March 31, 2024 as well. Its analysis states that there will be a 68 per cent increase in hiring compared to the Q3FY24.

According to Balasubramanian A, VP & Business Head, TeamLease Services, the hiring boom is likely to continue for the entire 2024. “The Indian travel and hospitality sector’s hiring rebound after the pandemic is set to continue in 2024, with projections exceeding 2023 levels by 15-20 per cent,” he told businessline.

Another reason for the hiring in the hospitality sector is it faces a higher attrition rate than pre-pandemic times, and hotel companies are seen adjusting their workplace policies to retain existing staff and attract new talent. Job roles for IT, Engineering, Office Services, and blue-collar professions continue to be the top roles for hiring. 

In the travel sector too, roles like sales, engineers, marketing, and customer service will see high demand. Tech skills in AI, AR/VR, and online platforms are increasingly sought after. City-wise, Mumbai, Delhi, Kolkata, Chennai, and Hyderabad will lead the charge, leveraging their established infrastructure and tourist activity. 

However, the landscape isn’t static.

“Sustainability and responsible tourism will create new job avenues like eco-tourism and conservation, while upskilling existing workforce will be crucial. Government initiatives like Incredible India campaign and infrastructure projects will also play a key role in job creation. So, the travel sector will be brimming with opportunities in 2024 too,” Balasubramanian added.

With the Maharashtra Real Estate Regulatory Authority cracking down on developers who fail to furnish their quarterly progress reports (QPRs) on time, compliance levels have increased remarkably in the state.

Of the 480 projects registered in April, 222 filed quarterly progress reports within the prescribed time.

In the event of non-compliance, MahaRERA puts projects on hold and freezes bank accounts. According to the regulator, currently 546 projects have been held in abeyance for non-compliance and their bank accounts frozen.

The regulations require developers to post quarterly progress reports of projects on the MahaRERA website.

“This helps homebuyers know the current and true status of the project,” said Ajoy Mehta, chairman, MahaRERA.

He said that the response from 46.25 per cent of projects in March was “certainly comforting”, compared to 0.02 per cent in January. But “MahaRERA aims for 100 per cent response and  insists on that”, he added.

Empowering homebuyers

Knowing the project status not only provides comfort to homeowners, who invest hard-earned money or costly loans in them, but also empowers them, he said. Earlier, before the advent of RERA, homeowners had practically little to no rights and developers had the upper hand.

Mehta, who has been at the helm of MahaRERA since 2021, has taken a hard line, telling developers to toe the line or face consequences.

The QPRs give homebuyers an idea about the progress of the project, including details such as how many units have been sold, how much money was collected, the expenditure incurred, and whether the expenditure was commensurate with the progress made.

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Godrej Properties has purchased a 4-acre land parcel in Bengaluru on an outright basis. The company is planning to develop a premium residential project at the site with a revenue potential of ₹1,000 crore from 7 lakh square feet area.

The acquisition of an additional 1 acre land will increase the estimated revenue from the project to ₹1250 crore, it said in an exchange filing.

The land is located in Yeshwanthpur near National Highway 75, one of the prime locations in Bengaluru. The area offers well-developed commercial and social infrastructure and is in proximity to Goraguntepalya and Peenya metro stations providing access to the Central Business District and other parts of Bengaluru.

Also read: 2023 and your personal finance: How bl.portfolio stayed agile to deliver our best to readers

“Yeshwanthpur is an important micro market for us, and we are happy to add this land parcel to our portfolio,” Gaurav Pandey, MD & CEO, said.

“This will further strengthen our presence in Bengaluru and complement our strategy of deepening our presence in key micro markets across India’s leading cities,” he added.

The Adani Group, which is undertaking the redevelopment of Mumbai’s Dharavi, one of the largest slum clusters in the world, has roped in high-profile planners and designers from India and around the world — they will help in designing and conceptualising the master plan.

The Dharavi Redevelopment Project Pvt Ltd (DRPPL) will be working with architect Hafeez Contractor, UK’s consultancy firm Buro Happold and US-based design firm Sasaki, as well as experts from Singapore. Together, all of them will “reimagine one of the largest and most vibrant informal settlements in Asia”, said a release.

Buro Happold is known for Varso Tower in Warsaw, the tallest building in the European Union, the regeneration of Battersea Power Station and other projects. Sasaki has experience in city infrastructure projects such as the Denargo Market Master Plan and Public Realm development in Denver and the Ellinikon Park in Greece. Hafeez Contractor has been involved with social housing and slum redevelopment projects in Mumbai.

modern renaissance

The Adani Group is planning to embark on the renaissance of Dharavi. There are over 50,000 families living in Dharavi in crowded tenements, and it has developed an ecosystem of its own. DRPPL plans to build private homes with independent toilets, airy kitchens and rooms for family living and resting. Apart from this, there will also be provisions for shops and businesses, while for a more sustainable future there will be vocational job opportunities and upskilling of the local community.

It is more than an urban renewal and revitalising of infrastructure project. “Our goal is to elevate the quality of life of the residents of Dharavi while nurturing the essence of its vibrant culture,” said the release. The aim is to create a model of urban redevelopment for projects across in the country and across the world.

The project administrators are also taking help from Singapore, which till the 1960s, had shanties, slums and ghettos. Towards the end of that decade the Singapore Housing Board was set up and it started building world-class infrastructure that are now held up as prime examples of urban rejuvenation.

In 2023, Institutional investments in the Indian real estate sector reached $5.4 billion, marking a 10 per cent YoY increase, according to Colliers India.

Foreign investments maintained dominance, constituting 67 per cent of total inflows, while domestic investments surged by 66 per cent to $1.7 billion.

The office sector led with a 56 per cent share in total inflows, attracting global and domestic capital.

Despite overall stability, Q4 witnessed a 37 per cent YoY drop in investments, totalling $0.8 billion. Alternatives claimed a 51 per cent share in Q4 inflows, reflecting strong demand in segments like data centres, student housing, life sciences, and schools.

• Read: Indian real-estate funding up 82% in Q3 2023: Report

While global investment markets faced challenges, India remained a fast-growing economy, sustaining investor confidence. Although US inflows declined from 2020 levels, Canada and Singapore emerged as leading sources of foreign capital, contributing 78 per cent of global real estate inflows into India in 2023.

Notably, APAC countries increased their investment inflows 3.6 times compared to 2020, with investors favouring India due to its robust economic performance, improved regulatory framework, and sustained demand across real estate segments.

Piyush Gupta, Managing Director at Colliers India, highlighted the positive trend, stating, “As India’s real estate sector concludes another promising year, institutional investments increased by 10 per cent to USD 5.4 billion—the highest since 2020. Investments diversified across education, shared spaces, and data centres, contributing to a strong domestic upcycle in office, residential, and industrial areas. Looking ahead to 2024, investment activity is expected to remain robust, supported by strong domestic economic fundamentals, with technology and ESG factors playing key roles in investment decisions.”

Property registrations in Mumbai in December rose about a third on year, the second highest level in 11 years, while revenue collections increased 4 per cent yearly, state government data showed.

The city registered around 12,500 units in December; the stamp duty collected was ₹952 crore. Sequentially, registrations were up 28 per cent and revenue up 34 per cent.

Homebuyers in Mumbai continue demonstrating confidence in the property market, buoyed by stable demand and an enhanced positive sentiment. Property consultant Knight Frank said this optimism has resulted in a significant surge in Mumbai property registrations.

• Read: Mumbai property registrations a tad under 10,000 in November

The increase can be attributed to rising income levels and a favourable perception towards homeownership, it added.

In 2023, property registrations at 1.27 lakh units are the best since 2013, data from Knight Frank showed. This was also 4 per cent higher than last year. The total value of stamp duty collected during the year was close to Rs 11,000 crore, up by over a fifth on the year.

The considerable growth in revenue can be credited to various factors, including the registration of properties with higher values and the increased stamp duty rate, said Knight Frank.

“The year 2023 witnessed a remarkable upswing for the city’s real estate market as the city achieved its highest property registrations in 11 years driven by rising income levels, better affordability, and a positive homeownership outlook,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

“Notably, a 57 per cent increase in share of high-value property registrations attests to the robustness of the market. Supported by stable interest rate and an increasing preference for bigger and better homes, homebuyer confidence continues to fuel Mumbai’s real estate momentum,” he added.

Housing sales in Gurugram rose 13 per cent annually in 2023 on high demand, especially for luxury flats, but Noida and Greater Noida saw a seven-eight per cent fall, according to Anarock data on the Delhi NCR market.

• Also read: Luxury homes expected to find fancy with younger buyers in 2024

Real estate consultant Anarock’s data showed that sales of residential properties in Gurugram went up 13 per cent to 36,970 in 2023 from 32,615 units in the previous year.

However, sales in Noida fell eight per cent to 5,840 units from 6,360 units. Greater Noida saw a seven per cent drop in sales to 10,180 units from 10,985 units. Ghaziabad, too, witnessed a fall of eight per cent to 6,340 units from 6,890 units.

The total housing sales in Faridabad, Delhi and Bhiwadi decreased to 6,295 units during 2023 from 6,860 units in the previous year.

Overall, the Delhi-NCR saw only a marginal growth of three per cent in housing sales to 65,625 units during 2023 from 63,710 units in the previous year.

Anarock Group Regional Director & Head of Research Prashant Thakur said, “Apart from Gurugram, sales have fallen in other parts of NCR because of the lesser launch of new housing projects.” Realty firms Signature Global, TARC Ltd, and Elan Group attributed the rise in sales in Gurugram to strong consumer sentiment and the development of various infrastructure projects.

Pradeep Aggarwal, founder and chairman of Signature Global, said, “Gurugram’s real estate market is witnessing a surge in demand for the mid-income and luxury homes, driven by young professionals and nuclear families seeking an aspirational and convenient lifestyle.

• Also read: Mumbai property registrations surge to second-highest level in 11 years, revenue climbs 4% in December

Hotspot zones like New Gurugram, Dwarka Expressway and the Southern Peripheral Road are drawing huge buyer interest, fueling double-digit capital value jumps, he said.

Amar Sarin, MD and CEO of TARC Ltd, said, “Delhi NCR’s real estate landscape, especially Gurugram, is witnessing a renaissance, defying market challenges and illustrating robust demand.

Ravish Kapoor, Managing Director of Elan Group, noted that “within the NCR region, Gurugram stood out as the prime destination, bolstered by burgeoning infrastructure.” Dwarka Expressway, within the city, emerged as the most promising micro-market for the residential sector, Kapoor added.

Recruitment momentum in the travel and hospitality sector will continue in 2024.

According to TeamLease Services, the coming year will witness increased hiring in the travel and hospitality by 15 – 20 per cent, as compared to 2023. This surge is particularly evident in the fourth quarter of fiscal year 2024, with an expected uptick of 68 per cent compared to the preceding quarter.

• Also read: Travel, hospitality, restaurant industries witness uptick of 11.7% in credit deployment in Oct: RBI data

On the hospitality front, major hospitality players including Indian Hotels Company Limited (IHCL), which operates Taj Hotels, said it plans to add 20 hotels across its brands in cities like Patna, Nagpur, Puri, Udaipur, Bhutan, Goa, Gurgaon, and Cochin. Another listed player Lemon Tree Hotels is likely to have 20 openings expected in CY2024, in India, Nepal and Bhutan. Accor has a pipeline of five hotels in the coming year. Marriott International, with a pipeline of 60-plus hotels in the next few years, and Wyndham has a pipeline for adding 40.

A report by hospitality consultancy firm Hotelivate stated With a base of ~ 1,65,000 branded and organised rooms operating in India, another ~ 70,000 new rooms were signed and planned as of 31st March 2023. Of these, about 79 per cent are actively under development and are likely to open for business over the next 60 months. That amounts to a 33 per cent increase in supply on the existing base over the next 4-5 years. 

Covid-19 had pushed the construction of several hotels over the past two years. The cascading effect was visible in 2023. IHCL opened 20 hotels, whereas Accord added six new properties in 2023. Lemon Tree added a 23 per cent higher room inventory to its hotels in 2023 alone. According to industry experts, the Indian hospitality sector witnessed the highest room addition in 2023.

• Also read: Hotel rooms in North East states rise 2.5x as brands check in

The impact of this could be witnessed on hiring as well. According to a report by ‘foundit’ (formerly Monster.com) there were 44 per cent higher listings for jobs in the travel and hospitality sector compared to 2022.

TeamLease believes that this strong churn of hiring will continue in the last quarter of FY24 ending on March 31, 2024 as well. Its analysis states that there will be a 68 per cent increase in hiring compared to the Q3FY24.

According to Balasubramanian A, VP & Business Head, TeamLease Services, the hiring boom is likely to continue for the entire 2024. “The Indian travel and hospitality sector’s hiring rebound after the pandemic is set to continue in 2024, with projections exceeding 2023 levels by 15-20 per cent,” he told businessline.

Another reason for the hiring in the hospitality sector is it faces a higher attrition rate than pre-pandemic times, and hotel companies are seen adjusting their workplace policies to retain existing staff and attract new talent. Job roles for IT, Engineering, Office Services, and blue-collar professions continue to be the top roles for hiring. 

In the travel sector too, roles like sales, engineers, marketing, and customer service will see high demand. Tech skills in AI, AR/VR, and online platforms are increasingly sought after. City-wise, Mumbai, Delhi, Kolkata, Chennai, and Hyderabad will lead the charge, leveraging their established infrastructure and tourist activity. 

However, the landscape isn’t static.

“Sustainability and responsible tourism will create new job avenues like eco-tourism and conservation, while upskilling existing workforce will be crucial. Government initiatives like Incredible India campaign and infrastructure projects will also play a key role in job creation. So, the travel sector will be brimming with opportunities in 2024 too,” Balasubramanian added.

Protech unicorn NoBroker achieved a substantial 96 per cent Y-o-Y revenue growth, reaching ₹325.88 crore in FY22, compared to ₹166 crore in FY21.

• Also read: Fine Organic Industries invests ₹60 crore

The Bengaluru-based startup, which has set its eyes on turning profitable in the next two years, reported a significant increase in losses for FY22. The company’s losses surged 62.6 per cent to ₹309 crore compared to ₹190 crore in FY21, according to the ROC filing shared by PrivateCircle Research.

The company operates as a comprehensive real estate solution, offering services including renting, buying, selling, home services (such as packers and movers, home interiors, and more), financial services, and society management through NoBrokerHood.

On the expenses side, In FY22, it also posted an increase in its employee benefit expense to ₹261.66 crore compared to ₹178.41 crore. While the total expenses increased by 67 per cent Y-o-Y to ₹678.94 crore compared to ₹406.32 crore.

• Also read: Punjab National Bank plans to raise capital up to ₹7,500 crore in 2024-25

The start-up currently has a footprint in 6 cities: Bengaluru, Mumbai, Pune, Hyderabad, Chennai, and the national capital region. Backed by players including Tiger Global Management, Elevation and General Atlantic, it has raised $366 million in funding over five rounds, with the last raise in March this year from a Series E round. 

The government’s decision to amend the SEZ rules and allow floor-wise denotification has brought in much needed relief to commercial space and office owners, who expect occupancy levels to rise.

In an office memorandum late on Wednesday, the government notified the changes to the regulations governing Special Economic Zones allowed denotification of an SEZ area on a floor-wise basis. Denotification is currently permitted building-wise leading to large portions of SEZs lying vacant.

The notification

The notification said, “…. the board of approval, on request of a developer of an information technology or information technology-enabled services special economic zone, may permit demarcation of a portion of the built-up area of an information technology or information technology-enabled services special economic zone as a non-processing area of the information technology or information technology-enabled services special economic zone to be called a non-processing area.”

“This marks a highly positive development for India’s office sector, already gaining strong momentum from global captive centers (GCCs),” said Aravind Maiya, Chief Executive Officer, Embassy REIT.

“…this amendment will further elevate the attractiveness of our 20 msf premium grade-A SEZ office spaces, positioning Embassy REIT on a trajectory towards achieving pre-COVID occupancy levels,” he added.

Ever since direct tax benefits were taken away for new units in SEZs from March 2020, they have become extremely unattractive, especially in the case of IT parks and with few takers for it, vacancies have been high. Currently there is around 170 million square feet of ready IT SEZ office space in the top 6 cities, of which over 30 msf is lying vacant. Another 10 msf of SEZ space is coming up that will be completed over the net two years.

Both Mindspace Office Parks REIT and Embassy REIT have a 20 per cent vacancy in their SEZs.

This is expected to change with the amended rules. The revision will infuse new office supply since the adaptability provided by floor-wise denotification offers various leasing prospects and will contribute to increased office occupancy rates in SEZ assets, according to Knight Frank India’s research head, Vivek Rathi. 

progressive reform

“This progressive reform is a significant step in the ongoing efforts to increase occupancy within IT SEZ Parks, boosting economic activity and creating more jobs,” said Mindspace REIT CEO, Ramesh Nair.

“This will help us now bring together businesses that focus on both the export and domestic market, under one roof,” Nari said, adding that it would  strengthen the appeal of its Grade A workspaces, “positioning us as the preferred choice for businesses eyeing operational consolidation.”

Brookfield REIT’s CEO Alok Aggarwal, said that the changed rules will help it meet the needs of IT, ITES companies as well as GCCs and aid in diversifying its tenant base.

“Our SEZ campuses are seeing significant leasing activities and rebound in occupancies. These amendments are going to further fasten the achieving of higher occupancies and enhance  value for all stakeholders,” he said.

Tata Realty and Infrastructure said the new policy would give the opportunity for seamless integration between SEZ and non-SEZ entities within a unified campus.

“This revised policy not only facilitates the expansion of companies’ office spaces but also extends the benefits of SEZ areas to Non-SEZ entities,” it said. It would by unlock vacant spaces in operational SEZs for the establishment of Domestic Tariff Area (DTA) units, boosting industry.

An expected moderation in inflation and a projected downward trend in interest rates should further improve home affordability in 2024, according to Knight Frank India’s affordability index.  

While Ahmedabad tops as the most affordable city, Mumbai remains the most expensive residential market in the country.   

Ahmedabad has an affordability ratio of 21 per cent, which implies that, on average, a household in Ahmedabad needs to spend 21 per cent of its household income to pay EMI for housing loans. Kolkata and Pune followed at 24 per cent each in 2023.   

In the case of Kolkata, the ratio improved by 1 per cent from 2022 and by 8 per cent from the pre-pandemic year of 2019. 

Expensive cities   

Mumbai is the only city beyond the affordability threshold of 50 per cent, a level exceeding which banks rarely underwrite a mortgage. The city, however, did see an improvement of 2 per cent in its affordability index — 51 per cent in 2023 from 53 per cent in 2022.   

Hyderabad is the second-most expensive residential market in the country. The affordability index of the city remained unchanged at 30 per cent for both 2023 and 2022, as home prices increased by 11 per cent in 2023.   

The National Capital Region (NCR) has seen its affordability index improve to 27 per cent in 2023 from 29 per cent in 2022.   

Bengaluru is the fourth-most expensive market, with an affordability index of 26 per cent in 2023. The ratio has improved marginally by 1 per cent since 2022 and by 6 per cent from the pre-pandemic year of 2019.  

The affordability index of Chennai has improved by 2 per cent, from 27 per cent in 2022 to 25 per cent in 2023.  

“Further, if the RBI decides to lower the repo rate later in 2024, as is widely expected, leading to a reduction in home loan interest rates, the affordability of homes in 2024 could see a noteworthy enhancement, providing a comprehensive boost to the sector,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India. 

Methodology  

The Knight Frank Affordability Index indicates the proportion of income that a household requires to fund the monthly instalment (EMI) of a housing unit in a particular city. The affordability index level of 40 per cent for a city implies that, on an average, households in that city need to spend 40 per cent of their income to fund the EMI of a housing loan for a unit. An EMI-income ratio of over 50 per cent is considered unaffordable as it is the limit beyond which banks rarely underwrite a mortgage. 

During the first half of FY 2024, the commercial office space experienced sluggish growth with a 5 per cent increase in new office supply across the top 7 cities compared to H1 FY23, states a report by Anarock. Additionally, the net office absorption dropped by 1 per cent y-o-y.

Grade A office rental values averaged ₹83 per sq. ft. per month, showing an increase from approximately ₹77.5 per sq. ft. in H1 FY23, according to Prashant Thakur, Regional Director & Head – Research, Anarock Group.

Chennai led with a notable 10 per cent annual increase in average monthly office rental values, reaching around ₹68 per sq. ft. in H1 FY2023. Hyderabad followed closely with an 8 per cent yearly growth, rising from ₹61 per sq. ft. in H1 FY2023 to about ₹66 per sq. ft. in H1 FY 2024. Bengaluru, Pune, and Kolkata each witnessed a 7 per cent annual growth, while MMR and NCR registered a 5 per cent increase.

largely stable

Despite global corporate layoffs and reduced business volumes, office activity remained largely stable in the first half of FY 2024. New completions saw a modest 5 per cent yearly increase, and net absorption dropped by just 1 per cent. IT/ITeS continued to dominate leasing transactions in H1 FY2024 but saw a decline in overall leasing share from 46 per cent in H1 FY2020 to 29 per cent in H1 FY2024. Coworking spaces, on the other hand, saw an increase in share from 11 per cent to 24 per cent.

With increased office space completions, vacancy levels rose marginally across most top cities, except in NCR, MMR, and Kolkata. The average vacancy rate of Grade-A offices in the top 7 cities collectively increased by 0.95 per cent, reaching 16.85 per cent in H1 FY24. Pune had the lowest annual average vacancy rate at 8.3 per cent, while NCR, MMR, and Kolkata witnessed a year-on-year reduction in vacancy levels.

In terms of variations, Pune, Bengaluru, and Hyderabad experienced increases in office space vacancy levels over the financial year.

Despite short-term challenges, the mid-to-long-term outlook for Indian commercial office space remains positive, especially with Grade A offices available at sub-dollar rents. Stability in the office market is anticipated to return from the second half of 2024, noted the report.

Larger homes, upgrade to premium properties (of over ₹1 crore) and a young buyer-base mostly in their early to mid-thirties drove residential sales demand in India in 2023. And initial indications show that the trend is here to stay “prominently” in 2024 with developers fine tuning their launches targeting a “more aspirational” and “younger buyer profile”.

ANAROCK research maintains that the first nine months of calendar year 2023 saw housing sales of 3.49 lakh across the top 7 cities which were 96 per cent of the total sales of full-year 2022 and “the trend for Q4 (October–December) looks equally strong”.

Several developers had a healthy pipeline of new project launches during the year. In 9 months 2023 3.28 units were launched, a 24 per cent rise against 2022’s 2.65 lakh units.

“We saw an overall 8-10 per cent jump in average residential prices in 2023 as against the previous year. In 2024, we may see up to 12 per cent increase in average prices across cities, proviso the current momentum continues,” Anuj Puri Chairman, ANAROCK, said.

According to him, the fact is, rising interest rates and global headwinds notwithstanding, residential demand “remained at an all-time high”, across cities. The average property prices in the top seven cities combined increased by some 11 per cent-odd in the year, from ₹6,105 per sq ft. in Q3 2022 to nearly ₹6,800 per sq ft as on September-end in 2023.

Manoj Gaur, Chairman, CREDAI, said he does not anticipate any significant price rise. At best, it would grow linearly as supply and demand are matched. He, however, maintains that it is unlikely that there will be a slowdown in the premium housing segment.

“The premium housing segment will show no signs of slowing down,” he told businessline adding that, there continues to be a preference for larger living spaces and luxury.

Premium and Luxury offerings

Amar Sarin, CEO and MD of TARC echoes his view. “Anticipating a robust economic trajectory, particular attention is directed towards the burgeoning luxury residential sector,” he said.

The premium and luxury segment comprising units priced at ₹2 crore and above in India “maintained strong sales momentum”, registering a 70 per cent y-o-y increase in the January -September period. The trend is even more pronounced in certain cities such as Delhi-NCR and Mumbai, where the combined share of these categories in overall sales is around 20 per cent.

Data from CREDAI shows, that in the Delhi-NCR region, saw a 216 per cent surge in luxury housing sales in 2023, the highest in India.

“The premium and luxury segment emerged as a sought-after investment avenue, particularly for HNIs and NRIs seeking to safeguard their investments amid global macroeconomic uncertainties,” said Anshuman Magazine, Chairman and CEO – India, South East Asia, Middle East and Africa of CBRE.

In fact, sales of only luxury units (priced upwards of ₹4 crore) during the period grew by more than 75 per cent when compared to the same period last year.

“This demand is supported by quality supply being launched by leading developers including DLF, who are launching projects across configurations such as independent floors, villas and condominiums,” Aakash Ohri, Joint Managing Director and Chief Business Officer, DLF said.

Developers operating in this segment are not only tapping the demand for good-quality homes but are also in a position to strengthen their balance sheets via this self-liquidating, high-profit margin segment.

Changing Buyer Profiles

Amid transforming preferences, affordability is no longer be the sole decisive factor for homebuyers. The average age of the first-time home-buyer in India is now around 30-35 years, almost 10 years younger than the previous generations, where home buying was made post-45 years.

Sources say, the younger buyers are investing into homes which are priced upwards of ₹1 crore and some are especially investing in premium ones upwards of ₹3 –4crore.

“The average age of the first time buyer is down to around 30-35 years now,” said Ohri.

Real Estate Investments

The land acquisition space has been buzzing with high interest, primarily from developers in the recent past.

According to CBRE, in 2023, out of the cumulative $ 5.1 billion inflows into the Indian real estate sector, around 40 per cent of the overall investment was committed for land acquisition. On a cumulative basis, nearly 7,700 acres of land have been acquired by developers and investors during the 2018-22 period.

“Evidently, the residential sector has been at the forefront of these commitments as its garnered a share of 83 per cent out of the total $ 2 billion that was committed for land investments during Jan,” CBRE’s Magazine said.

Godrej Properties has sold inventory worth over ₹2,600 crore in its project, Godrej Aristocrat, in Gurugram, on Golf Course Extension Road — an established residential location with good infrastructural facilities. The company has sold over 600 units in the project.

In an exchange filing, the Mumbai-based real estate developer said that this is its most successful launch ever, surpassing the previous best when it had sold homes worth over ₹2,000 crore at its project, Godrej Tropical Isle in Noida, last quarter.

“Gurugram is an extremely important market for Godrej Properties. We hope to launch four new projects in Gurugram in 2024 and will endeavour to create outstanding residential communities that deliver long-term value for residents,” said Gaurav Pandey, MD & CEO, Godrej Properties.

The year 2023 is set to see record sales of luxury homes, as buyers are digging deep into their pockets to buy fully-loaded homes, the trend being seen across all well-heeled income brackets. It’s not merely the much publicised tech CXOs, the unicorn billionaires or the rarefied breed of top dollar earners; the demand for luxury is coming from all segments.

“I am seeing the buying of luxury homes is much more broad-based,” Cyrus Mody, Founder and Managing Partner of Viceroy Properties, told businessline.

Viceroy Properties, which has positioned itself as a luxury residences builder, launched its first project just prior to the pandemic and has reaped the benefits of the unprecedented demand for luxury homes over the last year or so.

Mody says the demand has received a further fillip with the positivity in the economy, the wealth created in the equity markets and that is translating into higher spending power.

Here are edited excerpts of the interview with Mody.

India’s residential real estate saw a good year in 2023, both in term of launches and demand. And the current trends indicate a good 2024 too, says Aakash Ohri, Joint Managing Director and Chief Business Officer, DLF Ltd, the country’s largest real estate player.

According to him, real estate investment or home-buying is among the top five priorities now. In an interview to businessline, he talks about the year gone by and the future outlook. Edited excerpts:

Published on December 25, 2023

The much-awaited amendments in the SEZ regulations, while a positive development for the commercial real estate sector, are unlikely to have any immediate impact on SEZ occupancies and on office rents, which are likely to take some time to go up.

Last week the government issued a notification allowing floor-wise denotification of SEZ spaces into non-SEZ use within information technology and IT-enabled services SEZ parks. It was hailed as a positive move by office and commercial space owners including Real Estate Investment Trusts (REITs) sitting on considerable SEZ inventory.

Office demand continues to be subdued especially among the IT/ITES segment and a recent report by CREDAI-CRE Matrix forecast office absorption in 2023 at around 55-57 million square feet, much lower compared to 70 msf last year. With demand for housing continuing unabated residential development is proving to be more attractive compared to office development.

The higher vacancies mean lower room for rental growth making office unattractive for developers, especially with residential prices rising every quarter. 

Compared to 20-100 per cent increase in prices across cities from pre-Covid times, office rents have been fairly stagnant due to the higher vacancies.

SEZ vacancies

The total SEZ stock across the top six cities – Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune – is 173 msf and the pan-India vacancy is at around 19 per cent, according to data from Colliers.

Hyderabad has the highest vacancy at 29 per cent, followed by Mumbai at 24 per cent. Bengaluru has the least vacancy at 12 per cent followed by Pune at 18 per cent.

The IT and ITES SEZs comprise about one-third of the total office stock. The headwinds that the sector is battling and a slowdown in the major economies leading to delays in decision-making on taking up real estate space are challenges for the sector.

Among office landlords, builder DLF Ltd and two REITs, Mindspace Business Parks REIT and Embassy Office Parks REIT have SEZ space ranging from 46-58 per cent of their portfolio, according to a note by Jefferies, higher than the pan-India average. The brokerage firm said that the large office owners could benefit the most from the changes in SEZ rules.

“There will be better utilisation of SEZ spaces now, than prior to the notification,” countered Vivek Rathi, head of research at Knight Frank India.

Rathi pointed out that with the denotification, restrictions on such spaces had been removed for other occupiers. “They’ll also become eligible for such spaces now,” he added.

Stagnant office rents

The high vacancies and low demand have kept office rents stable, a disincentive for builders to develop office spaces.

In 2021 and 2022 several frontline builders, enthused by the unprecedented demand for housing and the scope to raise prices, had said that they would be focusing on building residences since that was where they were getting all their cashflows. Even now bulk of the real estate developers’ resources are directed toward the residential segment.

Though fresh stock of high quality office space is yet to come into the market, the existing vacancies are high enough to keep rents low. Jefferies said that the SEZ notification is unlikely to create new demand.

Rathi said that SEZ spaces were of very high quality and due to the sunset clause in 2020 and removal of direct tax benefits such spaces have started going at a discount to the non-SEZ areas. This could make them more attractive for prospective occupiers.

For instance, the rents at DLF Cyber City SEZ are at a 30 per cent discount to non-SEZ rents in the vicinity, according to Jefferies.

In the fourth quarter of 2023, the Indian office market saw 58.2 million square feet of gross absorption across the top six cities, representing a 16 per cent y-o-y growth in demand, states Colliers India.

While the contribution of the tech sector to office leasing continues to decline, from around 50 per cent in 2020 to 25 per cent in 2023, overall leasing activity continued to diversify. The sectoral contributions from BFSI and engineering and manufacturing sectors have almost doubled, increasing from 10-12 per cent in 2020 to around 16-20 per cent in 2023. 

In addition, demand from flex operators stood at 8.7 million square feet, marking a 24 per cent growth compared to 2022. Moreover, flex penetration in the Indian office market is expected to rise further in 2024 as developers are likely to adopt a core plus flex strategy for decision-making.

• Also read: India’s office sector anticipates 20–22% y-o-y growth in 2024: report

The last quarter of the year witnessed the highest-ever demand for office spaces in India, with all three southern cities of Bengaluru, Chennai, and Hyderabad registering the best performance since the Covid-19 pandemic, said the report.

While Bengaluru and Delhi NCR drove leasing activity during 2023, accounting for about half of the total demand for office space in India, Chennai made it to the top three list for the first time. Furthermore, with more than 2x leasing activity in 2023 compared to 2022, Chennai breached all earlier highs and recorded 10.5 mn sq ft of gross absorption. 

• Also read: RERA gains momentum in addressing consumer complaints across India

The demand momentum, particularly as seen during the last quarter, will pave the way for an optimistic start to 2024. “Moreover, increased preference for a combination of core and flex real estate spaces, heightened activity in Tier II markets, and next-generation offices with more sustainable elements will be the key themes for office markets in 2024,” noted Arpit Mehrotra, Managing Director, Head of Office Services, Colliers India. 

Even large transactions with around 30 million square feet saw a 24 per cent increase. Global Capability Centers (GCCs), which typically have large space requirements, have resumed their expansionary activities with greater fervor towards the second half of 2023, especially in the fourth quarter. Almost 40 per cent of the large deals in the top six cities have come from GCCs, particularly from the technology and BFSI sectors.  

With 50.1 million square feet of new completions, fresh supply across the top six cities rose about 17 per cent y-o-y, indicating higher developer confidence for near-term space uptake.  

Nitin Gadkari, Minister for Road Transport and Highways urged India’s construction sector to invest in research and to cut India’s net carbon emissions to zero by switching to Hydrogen fuel instead of fossil fuel. These decisions could make India’s construction sector the largest in the world, he said. 

The Union Minister was speaking at the inauguration of EXCON, a construction equipment trade fair conducted in Bengaluru. “India’s construction sector currently is the world’s third-largest. By fostering collaborative endeavors among stakeholders and corporations, and through substantial government support, we have the potential to propel it to the top spot within the next five years,” he said. 

He further emphasised the construction sector’s significant contribution to Prime Minister Narendra Modi’s vision to make India a carbon-neutral economy. “Construction and mining operations consume 400 crore liters of diesel, which is quite detrimental to the environment and the economy. By embracing alternative fuels like ethanol, methanol, and hydrogen, the construction and mining sectors can effectively reduce emissions”, Gadkari noted.

Job creation

The Road Transport minister also said that the construction industry alone has created 30 lakh job opportunities thus far. Highlighting that the current import of fossil fuels is ₹16 lakh crore, Gadkari spoke about making Indian construction companies the best in the world within the next five years. He spoke about business prospects for the construction industry within the state, with significant opportunities arising from several infrastructure development initiatives. These projects may be building roads, flyovers, industrial infrastructure, and power.

Chandrajit Banerjee, Director-General of Confederation of Indian Industry (CII), said, “Currently, India’s construction equipment industry is exporting to over 140 countries. To enhance sustainability and efficiency, private players in the construction sector should focus on automation, the adoption of advanced technologies, global best practices, the use of alternative fuels, and innovations in utilizing waste materials as raw materials for construction projects. This approach can reduce both the cost of construction and the rate of pollution.”

The event accommodated over 1,000 exhibitors, with over 100 from 15 countries including France, Germany, Italy, Turkey, and the UK. EXCON 2023 will showcase the latest strides in artificial intelligence, IoT, and automation, sustainable power solutions, and exhibits of electric and hybrid machinery tailored for low emissions and optimal energy efficiency.

With inputs from BL Intern Sanjana B

Last month Securities and Exchange Board of India (SEBI) greenlighted the launch of micro, small and medium real estate investment trusts (REITs) paving the way for unregulated fractional ownership platforms to function under a REIT framework. Mumbai-based hBits intends to be first off the block in launching a REIT. “We are working on creating the structure that will be required….our aim is to be the first fractional platform that lists as a MSM REIT,” hBits founder and CEO Shiv Parekh told businessline.

The fractional ownership platform has assets under management of ₹260 crore, which it intends to double in the next four months and take that to ₹1,000 crore by the end of the next fiscal year.

Fractional ownership platforms raise money from investors through a special-purpose vehicle, and the funds are used to own and manage properties. Effectively, the concept involves several investors who jointly own a fraction of the rent-yielding real estate asset, which can be offices, warehouses, malls, and data centres.

Parekh feels that being regulated will increase interest in such platforms. Following are edited excerpts of the interview with Parekh.

Fractional ownership, as a concept, has picked up a lot of traction in the country. It’s a relatively new concept, about five or six years old. This year has been monumental for the fractional ownership space. One of the biggest reasons is the SEBI regulation that has come into play.

We have seen a lot of interest in this asset class as an investment. As an investment product, it makes a lot of sense, because you get 8-9 per cent rental yield and along with appreciation, you can make a 15 per cent IRR (internal rate of return). Compared to even investing in a broad index, you can make higher returns with minimal downside risk.

First, as a concept it didn’t exist, and after it came as a concept, it was not regulated by SEBI, so people were not sure. But now that’s changed and overall investor interest is growing significantly.

As a company, it has been a very important year for us. We picked up quite a few assets in Mumbai. We are also excited for 2024 because in my opinion, this industry is going to explode with the new regulation. Already the product was great, now investor interest as well as distributor interest is going to increase substantially. On the flip side, there are numerous developers seeking an exit strategy who previously had limited options available. Commercial leasing in 2023 has been touching 2019 highs, at pre-Covid levels. So there are a lot of assets that are leased out and now developers want to exit them.

We have probably a database of about ₹30,000-odd crore worth of assets that we sourced from the market in the last 12 months. There are a lot of assets in the market. But obviously, not all the assets are worthy of investment. We look at a lot of criteria — it should be in a good micro market, it should be a Grade A asset, long term agreement, and a good market capital value. Ideally, we should negotiate for below market value, so that investors come in and make a good return.

If we just talk about offices, there is 800 million sq ft of Grade A offices in the top six cities and that is our focus markets.

To give some examples, in Mumbai we work with Kanakia Developers, who are Grade A builders. There are other Grade A developers like Boomerang and Wall Street. We work with Ajmera, a listed company. In Pune, we are talking to 3-4 developers; in Bengaluru, we are talking to one of the top three developers, and they have an option for a REIT. So there’s a lot of Grade A stock that’s available.

The question, however, is not about it being Grade A stock, but whether in that asset we have rented it at the right pricing. Are we negotiating the right pricing? It’s about getting Grade A stock at the right pricing with the right tenant and that’s where we add value.

Now, we have 60,000 registered users on our platform. I think three years ago, we must have been at 10,000 users. Our assets under management right now is ₹260 crore, we’re looking to double that in the next four months. Currently, we have 260,000 sq ft and after four months, we will be up to about half a million sq ft. Our target for the next financial year is to go from ₹260 crore to ₹1,000 crore in investments.

The details are not fully announced but we have started working towards it and are building the tech platform that will enable investment at a lower ticket size, so it’s completely digital. We are working on creating the structure that will be required because the regulator has given six plus six months to migrate, but our aim is to be the first fractional platform that lists as a MSM REIT.

US private equity firm Blackstone plans to exit its holding in Embassy Office Parks REIT for ₹6,931.5 crore ($833 million) in a block deal on December 20.

According to the term-sheet seen by businessline, Blackstone-sponsored special purpose vehicles will be selling 22.4 crore units or 23.59 per cent stake in Embassy REIT, the country’s first REIT to be listed.

The floor price for the deal is ₹310 a share, which is at a 7.7 per cent discount to the closing price of Embassy REIT on Tuesday.

Blackstone, which held a stake of 55.3 per cent in the REIT in June 2019, has been paring its stake over the years through strategic sales.

Talks with Bain Capital

This year, it has been attempting a full exit but could not find the right price. In January, talks with Bain Capital for a possible stake-sale floundered on valuations. Blackstone India officials also told businessline on two occasions during the year that it was not the right time to exit because the price was not right.

The REIT’s units listed at ₹314.10 in 2019 with modest listing gains and reached a high of ₹512 in March. It is currently trading at ₹335.75 on the NSE. It has fallen 3.8 per cent over a 52-week period to date and is down 13.7 per cent over a three-year period.

IIFL Securities and Kotak Securities are the bookrunners to the deal.

The Real Estate (Regulation and Development) Act (RERA) has gained momentum in addressing consumer complaints, with State authorities resolving 1,16,300 cases as of November 28, 2023, according to data from the Ministry of Housing and Urban Affairs.

Out of the total, Uttar Pradesh led with 38 per cent (44,602 cases), followed by Haryana with 20,604 cases (18 per cent) and Maharashtra with 15,423 cases (13 per cent, jointly accounting for 69 per cent of resolved cases nationwide, states ANAROCK Property Consultants.

Maharashtra dominates project registrations under RERA, constituting 36 per cent, while Tamil Nadu (16 per cent), Telangana (11 per cent), and Gujarat (7 per cent) follow.

In fact, registrations for projects and real estate agents under RERA have also been increasing steadily. Nationally, 116,117 projects and 82,755 real estate brokers were registered by November 28, 2023, marking a 63 per cent and 47 per cent growth, respectively, over the previous two years.

• Also read: IBBI seeks to smoothen insolvency processes for real estate projects

“Resolving homebuyer concerns is one of the main functions of the Real Estate (Regulation and Development) Act, which it has been demonstrably fulfilling,” said Anuj Puri, Chairman – ANAROCK Group. “More than 1.16 lakh consumer complaints have been handled by the various State and Union Territories’ RERA bodies, according to official data from MoHUA. Over the previous two years, the pace of project and real estate agent registrations was not slowed down,” he added.

Almost all States/UTs have notified rules under RERA. The North-Eastern State of Nagaland is still under process to notify its rules, while West Bengal – which earlier enacted its own legislation – was challenged on this by MoHUA before the Supreme Court. In March 2022, the apex court struck down the West Bengal Housing Industry Regulation Act, 2017 (WBHIRA), stating that it overlapped with RERA, which was enacted a law in the Parliament.

With 32 States/UTs having a functional Real Estate Regulatory Authority, Ladakh, Meghalaya, Nagaland, and Sikkim are yet to establish theirs. Real Estate Appellate Tribunals have been set up in 28 States/UTs, with Arunachal Pradesh, Jammu and Kashmir, Ladakh, Meghalaya, Mizoram, Nagaland, West Bengal, and Sikkim in progress.

Websites under RERA provisions are operational in 30 States/UTs, while Arunachal Pradesh and Manipur are in the process of implementation.

Moreover, adjudicating officers have been appointed in 26 States/UTs, with 10, including Arunachal Pradesh, Bihar, Manipur, Meghalaya, Nagaland, Sikkim, Uttarakhand, West Bengal, Jammu and Kashmir, and Ladakh yet to do so. The Supreme Court’s decision in March 2022 struck down the West Bengal Housing Industry Regulation Act, 2017, acknowledging its overlap with RERA.

India’s residential sector marked a notable upswing in the first nine months of 2023, recording 1,96,227 unit sales— equivalent to 91 per cent of the total sales in 2022 — hitting the highest since 2008 at approximately 260,000 units, according to JLL’s report.   

The growth trajectory is poised to extend into 2024, anticipating sales to reach between 2,90,000 and 3,00,000 units, fueled by robust demand and quality launches.

• Also Read: 2023 set to see record housing sales on sustained demand

Record sales

The report underscores record-breaking quarterly sales, exceeding 65,000 units on average until the third quarter of 2023. Sales during the first nine months of 2023 soared to a record 2,23,905 units, reflecting a y-o-y increase of 21.5 per cent. Projections indicate around 2,80,000 launches by the end of 2023, with a strong continuation into 2024, estimated at 280,000-290,000 units.

Dr. Samantak Das, Chief Economist at JLL India, remains optimistic despite rising home loan interest rates and prices. The domestic housing market retains a positive sentiment, with expectations of surpassing 260,000 units in residential sales and launching 280,000 units in 2023.

• Also Read: Residential sales in top 7 cities expected to surpass 215,000 units by the end of 2023: JLL report

A potential policy rate cut in 2024, contingent on GDP growth and inflation, could further stimulate residential sector growth, with sales expected to be around 290,000 to 300,000 units in 2024.

From January to September 2023, 71 per cent of residential sales were attributed to projects launched between January 2022 and September 2023. Consumers are increasingly drawn to under-construction projects due to developers’ track record in timely execution and delivery.

Premium segment

In the premium segment, the mid-segment price category (₹50 – 75 lakh) dominated 9 months 2023 sales, while the share of premium segments (above ₹1.50 crore) increased from 18 per cent in 9 months 2022 to 22 per cent in 9 months 2023. Delhi NCR and Mumbai led premium segment sales. The luxury segment, priced above ₹3 crore, experienced an 83 per cent surge from 8,013 units in 9 months 2022 to 14,627 in 9 months 2023.

Looking ahead to 2024, Siva Krishnan, Sr. MD, Chennai & Coimbatore, Head of Residential, India, foresees a buoyant residential market with sustained growth in the mid- and premium segments. A robust supply pipeline and new launches by branded developers are expected to maintain the market’s strength, with an estimated range of 2,80,000–2,90,000 units.

Private equity inflows into the Indian real estate sector fell 44 per cent in 2023 to $3 billion, as global investors exercised caution, said a report by property consultant Knight Frank India.

PE investments in real estate are on a downtrend since 2021, the lowest in eight years with near record low deals. Only 23 deals were struck during the year, with the lowest ever being during the pandemic year 2020 at 20, although the amount raised was higher at around $4 billion.

“Global geopolitical uncertainties and high interest rate environment with multiple rate hikes from US Federal Reserve and Central Bank of Canada have curbed investment activities from US and Canada, leading to significant reduction,” said the report. Over half of the inflows were from PE investors in Singapore.

Most of the inflows were in the office sector, following by warehousing and residential. There were no PE deals in the retail sector.

Yet, foreign inflows dominated investments during the year with domestic investment lagging.

“We have also witnessed a rise in interest from Asian private equity players in the recent past. This, particularly amid the impact on investments from western countries, could signal a positive shift for the Indian PE market,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

hBits, a fractional ownership platform for commercial real estate, expects investments worth ₹1500-2000 Crore from Gujarat-based HNIs and investors through its platform over the next 3 to 4 years, stated the company in an official release here Wednesday.

“Gujarat has always been one of our key markets with so far almost 20 percent of the investors on our platform being from this state. The investors from Gujarat are known for their versatility, and opting for fractional ownership further diversifies their portfolio by enabling them to invest in Grade A commercial assets spread across India. Amid the positive sentiments in the sector, we aim to further enhance our investor base from the state and scale up their investment value. The HNI population of the state remains our key target audience and we will be actively reaching out to them over the next few quarters,” stated Shiv Parekh, Founder and CEO of the company.

Gujarat Market

hBits allows investments in Grade A commercial real estate across key markets in India through its fractional ownership model.

Also read: Blackstone offloads entire stake in Embassy REIT for ₹7,100 crore

Ahmedabad ranks among the top six cities in India with a huge population of high net worth (HNI) individuals. Among other cities in Gujarat, Surat and Rajkot also have a high HNI base. hBits offers innovative opportunities for the HNIs to invest in Grade-A commercial properties such as offices, warehouses, etc. spread across India through fractional ownership and earn an average rental yield of up to 10 per cent with an IRR of up to 18 per cent, the statement added.

Ahmedabad has over 4.6 million square feet of Grade A commercial office spaces. The company is expanding its portfolio, engaging in negotiations with prominent developers in Ahmedabad and other key cities like Surat and Rajkot to acquire assets of comparable caliber.

Blackstone has sold its entire 23.5% stake in Embassy Office Parks REIT for ₹7,100 crore ($850 million) at ₹316.10 a unit, sources said.

The acquirers included existing investors Capital Group, Fidelity, Bain Capital, ICICI Mutual Fund, HDFC Mutual Fund and SBI Mutual Fund, who have become new investors.

The trade price was slightly higher than the floor price of ₹310 but at a discount to the current market price of ₹335.

With this transaction Blackstone has fully exited its investment in Embassy REIT, which was listed on the bourses in 2019 as the first REIT in the country. In 2022 it exited Mindspace Business Parks REIT, where was been one of the sponsors.

The PE firm had been negotiating with Bain Capital earlier this year to sell its stake in Embassy REIT but could not agree on the pricing and valuation.

The office sector anticipates strong 20–22 per cent year-on-year (y-o-y) growth in 2024, according to the JLL report.

In 2023, net absorption in the office market is expected to be on par with 2022, closing at 37–39 million sq ft. With leasing activity expected to further pick up pace in the last quarter of 2023, the year is expected to surpass the 2017–2019 average.

Further, the office markets’ performance is a testament to the strong fundamentals of demand and the absence of any lasting effects of the global headwinds. In 2024, net absorption is further expected to increase by 20–22 per cent to touch 45-47 mn sq ft. 

Despite a 23.9 per cent year-on-year decrease in supply during the first nine months of 2023, it is anticipated to strengthen and reach approximately 47-49 mn sq ft by the end of the year.

In line with the net absorption, the supply in 2023 will be higher than the 2017-2019 pre-pandemic average. In 2024, it is expected to increase by 22-23 per cent y-o-y to reach 58-60 mn sq ft. It is seen that there is a trend of flight to quality creating demand polarization towards buildings owned by institutional owners and established developers. 

Top seven markets

“The office space in India’s top seven markets is expected to increase to over 800 mn sq ft by the fourth quarter of 2023, up from the current 792.8 mn sq ft as of September 2023. The increasing importance of sustainability is reflected in the increase in green-certified buildings in the last few years. Green-certified buildings share in Grade A office stock went up from 39 per cent in 2020 to 53 per cent in 2023,” said Rahul Arora, Head, Office Leasing Advisory and Retail Services, India, JLL. 

Meanwhile, vacancies are expected to remain within the 16–17 per cent range by the end of the year. With a strong supply pipeline of 55–60 million square feet lined up in 2024, vacancies are likely to remain sticky at 16–17 per cent on the back of strong demand. Core markets, however, will continue to see single-digit vacancy levels.  

In 9 months 2023, there is a slight decline in space take-up by tech firms, but it is still likely to account for the biggest share in gross leasing by the end of the year. Other segments, such as manufacturing/industrial, BFSI, and consulting, increased their participation in leasing activity by establishing Global Capability Centres (GCCs). Notably, GCCs have a 54 per cent share of active office space requirements in the top seven cities of India. 

“In the year 2023, so far, India’s office market has stayed truly on course to see remarkable performance as net absorption is expected to exceed the three-year pre-pandemic average. We are likely to see net absorption of around 37-39 mn sq ft which is further expected to go up by 20-22 per cent y-o-y to reach 45-47 mn sq ft in 2024,” said,Dr Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.