It won’t be an overstatement to say that 2022 has proved to be a year of great success for the real estate sector. Dubbed as the turnaround year for segments like residential and retail, the year saw all segments recover from the COVID lows and record significant year-on-year growth. For the commercial segment, 2023 is expected to record substantial growth in leasing year-on-year, despite strong headwinds emerging out of the geopolitical challenges. The domestic demand remains strong, while the global companies have continued their growth in India, albeit at a slower pace.
If these trends hold up, 2023 should see a further growth in office space transaction as more corporations continue to recall their staff to office as well as continue to hire more. Further, while the global corporations may still demonstrate some restraint in the growth of their India businesses, the Indian conglomerates are expected to continue their growth leading to greater demand for office space.
Knight Frank Outlook for 2023 says that the retail segment will be seeing some consolidation in terms of ownership as seen in the last few years. However, as end-users return to malls and with malls evolving into destinations, we expect the Indian retail story to start seeing a new phase of growth, which will be balanced and more sustainable. We hope to see some significant investment activities in the segment as well.
The warehousing segment indeed saw one of the strongest years in 2022. With the growth of digital economy aiding the rise of e-commerce, we can hope to see a greater rise in demand for warehousing spaces, both in the top metropolitan cities as well as tier two and three markets. The new year may also see nascent trends like near and in-city warehousing attain importance.
Lastly, and most importantly, 2022 saw the resurrection of the residential market. The trend of preference for residential ownership, that started about 18 months ago, continued throughout the year, despite the rise of home loan rates by 225 BPS. This is, undoubtedly, a sign of the strength of the latent demand in the market. In the new year, we expect this trend to continue, with demand rising for both affordable as well as higher segments.
While 2023 may have its own challenges in the geo-politics impacting India’s real estate segment, some positive signs are emerging. There are signs that the Eastern European war may end soon, while the global trend of inflation may start receding by the mid of new year, and that global oil prices may also stabilize. Finally, our own domestic growth will start gaining momentum as domestic inflation is also likely to remain contained. These should have a strong and positive impact on the real estate sector.