Indian commercial property demand is on the rise and is at post-Covid highs. Ravindra Pai, managing director of Century Real Estate, said the ROI of commercial real estate is “relatively higher than in the residential market,” with established players actively seeking cooperation with local developers. “In office space leasing, technology tenants were the main driver of total market leasing activity in July 2022, with a 53% share.” , the insurance (BFSI) share was 18%,” Pai said in an interview with FinancialExpress.com. The company plans to expand into commercial real estate in fiscal year 2023, with eight new launches also slated for him in the residential segment of the pipeline. Below is an excerpt from the interview.
How is residential real estate currently performing? Where do you see this segment in the next 5-10 years?
In the years prior to the pandemic, ticket sizes ranged from Rs. Following the pandemic, the industry is witnessing strong demand from Grade A players and luxury homes in the planned segment at this price point. Today’s luxury buyers are increasingly demanding greener open spaces and homes. Residential real estate in India has experienced steady growth over the past two quarters of FY22-23 due to declining inventories and rising rents as hybrid and remote work become more common. This, combined with increased interest from individual clients seeking to acquire income-generating assets, pandemic-induced uncertainty and a decade of low mortgage rates helped boost sales during the pandemic. .
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What other real estate segments (asset classes) are attracting more takers today? Why?
Another real estate asset class attracting investors today is warehouses and data centers, where demand is steadily increasing. We anticipate even more investment over the next three to five years. Data centers require large parcels of land with ready infrastructure and yield higher returns (12-14%). In addition, warehouses are already an established asset class offering returns of up to 10%. Another emerging segment to watch out for is co-living or student housing.
How do investors view residential real estate as an asset class today? Which is more in demand, residential or commercial?
Residential real estate is picking up pace to accommodate more first-time homebuyers, while demand for commercial real estate is at post-COVID-19 highs as many offices reopen . In fact, his ROI in commercial real estate is relatively higher than in the residential market (typical return is 4-5%). In terms of office space, tech tenants were the key driver of total market leasing activity in July 2022, with a share of 53%. Banking, Financial Services and Insurance (BFSI) had an 18% share.
Do you think the holiday season has played any role in residential property sales?
Despite rising repo interest rates, the real estate industry is gearing up for strong sales for the upcoming festive season, with many players setting aggressive targets for sales bookings on occasions such as Dussehra and Diwali. We expect all major builders to introduce many festive offers to help sustain demand for residential real estate.
Please tell us about the company’s current performance and outlook for the current fiscal year.
FY22 achieved record performance. 72% of the salable inventory was sold last fiscal year. This has been achieved thanks to the tremendous trust and confidence of our customers in us. We are pioneers in planned development projects in the Bengaluru real estate market and have produced groundbreaking projects. Our plotted developments stand out in the market and have always performed well due to our extensive theme-based approach.We currently have 3.1 million square feet. Area under construction and an additional 2.1 million square feet of residential projects nearing completion.
We detail our expansion plans, upcoming launches, and additional investments in these plans.
We have a strong growth plan for 2023. This includes a steady foray into commercial real estate, with 2 million square feet slated for development over the next two to three years. A self-development project worth Rs 2,000 crores and a joint venture worth Rs 1,500 crores are underway. This will unlock 10 million square feet. of a major land parcel. Residential real estate has more than eight new launches slated for the planned, ambitious and luxury segments. These include over 1500 units in the ambitious luxury category and over 1000 units in the themed plotted development category.