·       2024 office net absorption to increase by 20-22% year-on-year, reaching 45-47 mn sq ft

·       2023 office supply expected at 47-49 mn sq ft

·       2024 supply projected to rise by 22-23% year-on-year, reaching 58-60 mn sq ft

The office sector has seen sustained growth in demand in 2023 despite the global sluggishness and is poised to achieve next level of growth in 2024 according to JLL recent report titled ‘2023: A Year in Review’.

Net absorption from Jan-Sep 2023 was at 26 mn sq ft which is 68% of 2022 full year number. In 2023, net absorption in office market is expected to be at par with 2022 to close at 37-39 mn 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. 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% to touch 45-47 mn sq ft.

Despite a 23.9% 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% 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.

“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. ESG continued to remain a decisive action point for all stakeholders in 2023 as energy consumption, green and net zero commitments are driving corporate action. The increasing importance of sustainability is reflected in increase in green certified buildings in last few years. Green certified buildings share in Grade A office stock went up from 39% in 2020 to 53% in 2023 (as of September 2023),” said Rahul Arora, Head – Office Leasing Advisory and Retail Services, India, JLL.

India’s office market: performance-based resilience

Source: Real Estate Intelligence Service (REIS), JLL Research

Headline vacancy is expected to remain within 16-17% range by end of the year. With a strong supply pipeline of 55-60 mn sq ft lined up in 2024, vacancy is likely to remain sticky at 16-17% on the back of strong demand. Core markets, however, will continue to see single digit vacancy levels.

In 9M 2023, there is a slight decline in space take-up by tech firms but 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 through setting up of Global Capability Centres (GCCs) strengthened their participation in leasing activity. Interestingly, GCCs have a 54% share in active office space requirements in 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% y-o-y to reach 45-47 mn sq ft in 2024. India’s innovation-led ecosystem, large talent pool and favorable policy initiatives will create a perfect growth tide for the office sector to flourish further in 2024. It is expected that more R&D Centres of Excellence will be set up in India at an accelerated pace. Therefore, GCCs will continue to be major drivers for increasing occupier demand in the future.” said, Dr Samantak Das, Chief Economist and Head of Research and REIS, India, JLL. 

Flex continues to drive market activity.

With sustained demand for flexible and managed enterprise services, flex leasing in 2023 is expected to surpass the previous peak achieved in 2022 to close at ~145,000 seats. 9M 2023 is already ~80% of the total seats leased in the full year 2022. In 2024, around 150,000+ seats are expected to be leased by flex segment. There is sustained demand for flex as an essential element of occupier strategies which now assimilate both conventional and on-demand flex spaces for portfolio optimization and better employee experience.

Trends look forward to in 2024:

·       GCCs key to increasing occupier demand; to help push absorption near previous peak levels. Segments like manufacturing, engineering R&D with Tech & BFSI are key drivers in this segment. 

·       With a strong supply pipeline of 58-60 mn sq ft lined up in 2024, headline vacancy is likely to remain sticky at 16-17%. Core markets, however, will continue to see single digit vacancy levels.

·       Institutional, quality assets will remain first choice of occupiers with ‘flight to quality’ a running thread in space requirements.

·       Sustainability will be key to real estate planning and portfolio strategy with occupiers demanding responsible real estate as part of their net zero targets.

·       Office portfolios are likely to expand further as hybrid working evolves with a strong ‘office-first’ approach.

·       Flex segment and dispersed Tier 1/Tier 2 strategy to drive space needs in 2024.

Also Read: How Infrastructure Projects are Creating New Real Estate Opportunities

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The objective that MahaRERA is pursuing is the transparency and symmetry of information. Whatever project information a builder has he should transparently share it with the home buyer, said Ajoy Mehta, Chairman, MahaRERA. The regulator is working to protect the real estate industry and wants to ensure its growth. Only when the real estate industry survives does the home buyer gain. He was speaking at an event organized by National Real Estate Development Council (NAREDCO) on RERA Updates & Insights. Mr. Mehta also agreed to hold a quarterly workshop jointly organized by MahaRERA and NAREDCO to help the developers gain clarity and improve compliances.

Speaking on the occasion Dr. Niranjan Hiranandani, Vice Chairman, NAREDCO appealed to the regulator to also help speed up the process of approvals. “There are several issues to be addressed for which the regulator needs to make efforts. For example, if there is a recession in the economy that leads to delay in project completions, how do we handle that risk?” Dr. Hiranandani asked.

Rajan Bandelkar, President of NAREDCO India while welcoming the panel noted that the RERA has helped the real estate industry gain respect due to regulation and professionalisation. “MahaRERA has been issuing innovative circulars and facilitating compliance. Allowing deregistration for example was a much-needed step as it allowed an exit route,” Mr. Bandelkar said.

Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure highlighted the fact that the amount of institutional funds flowing into the real estate industry has been growing at an astounding pace. So much of compliances is likely to pose challenges to the developers as well as the regulator going forward. “The industry is likely to attract an investment of around Rs 3 Lakh cr over the next 3 to 4 years. This money will be flowing from private equity investors and local lenders. It’s important that the developers are able to perform and fulfill the commitments.”

Sanjay Deshmukh, Nodal Officer for lapsed project, MahaRERA encouraged developers to improve the quality of the uploaded data. “Around 75-80% of participants were falling short on quarterly filing timelines. With due efforts from authority to facilitate the process in the last month alone 5,000 forms have been uploaded taking the number up to 18,000”, Mr. Deshmukh added.

Mahesh Pathak, Member, MahaRERA is optimistic that the number of stressed and lapsed projects will come down going forward. “We have developed objective criteria, SOPs and hired professional agencies to help with the monitoring process. Effective monitoring will ensure that fewer projects will face stress and get lapsed,” Mr. Pathak maintained.

Voicing developers’ concerns with regard to RERA compliance Ashok Chhajer, Chairman, Arihant Superstructures Ltd suggested a balanced approach wherein a buyer of a delayed project could be paid rent for the alternate accommodation, by the developer. “This will lower the burden on the developer and help him achieve early completion of the project”, Mr. Chhajer suggested.

Dinesh Doshi, President, NAREDCO – Progressive Neral Karjat said, “Change is the only constant and real estate regulation has evolved over last many years with industry working closely with the regulator (RERA).”

Gautam Thacker, Chairman, NAREDCO – Progressive Neral Karjat welcomed the regulator’s approach of protecting the interest of every stakeholder. “The real estate industry plays a critical role in nation-building, working on the government’s goal of housing for all. MahaRERA has strengthened the industry while prioritizing the interest of home buyers,” Thacker added.

Also Read: MahaRERA Inaugurates the First batch of Real Estate Agents Training

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These warrants against errant developers are sent to the collector offices of the district in the state and the action is initiated accordingly.

The follow-up and monitoring initiated by MahaRERA has helped the affected home buyers in 118 cases in Mumbai city, Mumbai suburbs, Pune and Raigad districts to get compensation of around ₹100.56 crore so far.

As part of strengthening the control system, Maharera started from December to review the warrants announced from time to time. For this, reminders and request letters were sent to the 13 District Collectors of Mumbai City, Mumbai Suburb, Thane, Pune Raigad, Palghar Aurangabad, Nagpur, Nashik, Chandrapur, Sindhudurg, Satara and Ratnagiri.

Out of this, ₹413.79 crore rupees were expected to be recovered in 594 warrant cases in Mumbai city, Mumbai suburbs, Pune and Raigad collectorate. ₹100.56 crores has been recovered from 118 of these warrants in these 4 districts, bringing great relief to many affected home buyers in these areas.*

₹11.42 crore was recovered from 3 warrants instead of ₹44.92 crore from 14 warrants in Mumbai city. This amount is much higher in Mumbai suburbs ₹255.84 crore are to be received from 343 warrants ₹55.57 crore was recovered in 80 of these cases.

163 warrants worth ₹107.93 crore were issued in Pune district ₹32.76 crore have been recovered under 33 warrants. 74 warrants were issued for the recovery of ₹15.10 crore in Raigad district ₹81 lakhs have been recovered from 2 of these warrants.

Complaints of home buyers regarding non-handover of possession on time by concerned developers (builders), partial abandonment of projects, non-maintenance of prescribed quality, etc. come to MahaRERA. The respective developers are ordered to pay interest/damage compensation/refund etc. within the prescribed time frame after hearing these various forms of complaints of the home buyers properly.

The Collector’s office plays an important role in recovering the amount if the developer fails to pay the amount within the given period. Under Section 40(1) of the Immovable Property (Regulation and Development) Act, 2016, the Collector Office has the authority to recover the said recovery as arrears of land revenue as per the provisions of the Maharashtra Land Revenue Act. Therefore such warrants are sent from MahaRERA to the concerned Collectors.

Also Read: MahaRERA sends show cause notices to 19,539 Realty Projects

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Construction is an ever-growing industry. Every construction company wants its business to soar high. In a market as competitive as the construction business, you have to always be on the lookout for “the next best thing,” which will give your company the edge over others in the market. But when it comes to growth, there isn’t a simple one-size-fits-all formula you can use to increase your construction revenue.

However, there are many effective strategies ranging from careful planning and network building to social media influence that you can use to grow your business that can help you reach new heights, make more money and increase your market share. Here are some ideas to get you started.

Prioritize customer service.

A happy, satisfied customer is significant for your business. Small construction businesses succeed best when they seek and find clients who fit seamlessly within their mission and who they can easily satisfy. Construction companies also expand swiftly when they have established strong customer service teams to help them build long lists of happy clients who can refer new clients and make repeat purchases. Indeed, if you want your small business to grow, you should focus on exceeding the expectations of your current customers to reduce customer turnover. Retaining clients who can make repeat purchases will help you spend less on marketing.

Get Online

The best way to promote your company is via the web. The website and social media can grow the construction business in an accelerated manner. In order to reach as many people as possible, you should create a website with all the essential information, such as contact details, expertise, and pricing.

Quality is king.

Cutting corners to reduce costs to speed up the completion of a project or closing a deal can be detrimental. Especially in an industry like construction, it is possible to overlook the quality and fall for the promises of the large quantities. But in the long run, the quality of your product makes a big difference. And the profitability of your services will ultimately depend upon the quality of your work!

Expand your services

A great way to grow your business is to expand into other areas of service. Adding streams of revenue to your business will not only increase your revenue, but will also add prestige to your company’s profile.

Be Up to Date with Industry Trends

The next hack to grow your construction business is to stay updated with the latest construction industry trends. In a rapidly progressing world, any company that isn’t innovating constantly can be categorized as a losing business. So, changes in the positive direction are vital for the business to flourish. Construction companies should be aware of the latest trends in the industry. They must strive to accommodate them as soon as possible. Starting early in an emerging market can skyrocket your business.

Nidhi Aggarwal, is Founder, SpaceMantra, all views expressed in this article solely belong to the author and do not represent the views of SquareFeatIndia

Also Read: Step-by-step Guide for Construction of any Building

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Demand for flexible office spaces has hit new high notes post the pandemic, with major companies and businesses including start-ups now opting for co-working. Latest ANAROCK data reveals that out of a net absorption of approx. 20.8 Mn sq. ft. across the top 7 cities in H1 2022, the share of co-working spaces stood at 20%. Back in H1 2021, its share was just 6% of net office absorption of approx. 9.33 Mn sq. ft.

In contrast, the share of IT/ITeS sector – India’s leading office demand driver – declined from 49% in H1 2021 to 36% in H2 2022. However, this decline is largely because many IT companies are now also preferring flexible spaces to regular office spaces.

In terms of net absorption across the top 7 cities in H1 2022, Bengaluru and Hyderabad remained on top, comprising 50% of total demand share.

Bengaluru, Hyderabad and Chennai – the top Southern cities – together witnessed net office absorption of approx. 12.2 Mn sq. ft. Of this, 18% or approx. 2.23 Mn sq. ft. was by coworking players.

Western markets of MMR and Pune saw net absorption of nearly 5.45 Mn sq. ft. Of this, 27% or approx. 1.5 Mn sq. ft. was by coworking players.
In NCR it stood at approx. 2.75 n sq. ft. Of this, 15% or approx. 0.41 Mn sq. ft. was by coworking players.

In Kolkata, merely 0.4 Mn sq. ft. office space was absorbed. Of this, 14% or approx. 0.06 Mn sq. ft. was by coworking players.

Anuj Puri, Chairman ANAROCK Group, says, “Coworking has received a major boost after Covid-19 disrupted the previous status quo. A major factor driving demand is that these spaces are not concentrated in just the city centres or major employment hubs; they’re spread across different areas, including the housing-intense suburbs. Coworking spaces are now also operating out of malls and hotels across cities. Many large office parks are also housing coworking spaces. This helps companies to remain closer to their employees and offer them flexibility.”

Another advantage is that with flexible office spaces, companies can plug-and-play at the same cost rather than wrestling with office layouts and fit-outs. The lock-in period for taking up a regular office space is anywhere between 3-4 years. All these factors have also helped boost the demand for co-working spaces.

Office Rentals
Backed by rising office space demand, average monthly office rentals are also seen to be rising across the top cities:

• NCR and Hyderabad each saw a 5% rise in avg. monthly office rentals in H1 2022 compared to same period in 2021. Currently, the avg. monthly office rents in NCR are at INR 80 per sq. ft. while in Hyderabad it is INR 60 per sq. ft.
• Bengaluru and Pune each saw a 4% yearly rise. The avg. monthly rentals in these IT hubs by the end of H1 2022 stood at INR 81 per sq. ft and INR 72 per sq. ft., respectively.
• MMR, Chennai and Kolkata witnessed a 2% rise each in avg. monthly rentals in this period. In MMR, the avg. office rentals are the highest among the top 7 cities at INR 128 per sq. ft.; in Chennai they are INR 61 per sq. ft., and Kolkata has the lowest at INR 53 per sq. ft.

Meanwhile, the top 7 cities also witnessed robust new office supply in H1 2022, aggregating to 31.8 Mn sq. ft. Bengaluru, Hyderabad and Pune dominated with a total 74% share. Given the high new completions, average vacancy levels across top 7 cities rose by 2% to stand at 15.95% in H1 2022.

Also Read: Office portfolio expansion on cards as 63% of businesses back to the office on a hybrid basis

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Buying a home is that one dream which is harboured by every young man or woman. Many people take a lifetime to buy their own house, some achieve it early in their careers. While young, most of the working professionals do not think about owning a home. However, if they start taking the baby steps towards owning an abode early in their career, they might own property very soon. Here is a lowdown on why one should plan and go for a property investment early in their career.

Lower EMIs– When you are young, there is ample time for you to pay back the home loan. When you are in your mid-20s (20-25 years), you can easily avail of a home loan of 20 plus years. The financial institutions are also willing to offer longer-term loans. With a working life of 25 plus years, you will own your sweet home early in life.

Moreover, as you grow in your career and the salaries get better, you can easily prepay the loan to get debt-free. At a time when you are unmarried, have no children and have limited liabilities can turn out to be the best time to invest in a property. A property investment in your 20s might turn out to be the best decision of your life.

Tax Benefits– When you are earning well, tax benefits and tax savings are a top priority. The acquisition of a property early in your career can support you in saving a significant amount of tax. When you take a home loan to acquire a property, it is eligible for tax benefits under Section 80 C of the Income Tax Act. A home loan comes with multiple tax benefits for a homebuyer. When you are young and invest in an under-construction home, you are eligible for a pre-construction interest rebate and can claim a deduction on the interest paid on the home loan.

According to the Income-tax Rules, deduction in five instalments, from the date when the property is acquired or construction is complete, is allowed under the IT act. However, the maximum deduction is capped at Rs 2 lakh. If your home loan falls under the ambit of section 80EEA, you can also claim an additional Rs 1.5 lakh claim.

Asset Acquisition– Buying a property at an early age will make you the owner of a reliable and appreciating asset. At the back of your mind, you can rest assured that even if nothing works out, you have an asset to bank upon. If you purchase land in your 20s, its value will appreciate and the ROI will be exponential after 10-15 years.

Rent Saving- If you have decided to invest in a home early in your career, it can save a significant amount of rent for you. When you acquire a home, you can avail of a home loan and the money that would have gone into rent can be utilized in the form of Equated Monthly Installments (EMIs). With the passage of time, the amount of EMIs also reduces, the loan gets reduced and eventually, you get your own home very early in your life.

Conclusively, a property investment early in your career is a wise decision, given the income range and other aspects are appropriately covered. However, experts caution that youngsters must weigh in all the factors before going for a home loan as in cases of job loss or recession or any unforeseen jib loss, the situation might get tough and repayment might be difficult. If you have your basic needs duly covered, you can go for a property.

Note: Annuj Goel, is MD, Goel Ganga Developments, views expressed solely belong to the author and do not represent that of SquareFeatIndia.

Also Read: RBI’s Repo Rate Hike may impact real estate demand: Realtors

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By Shubham Arora

After a continued fallout from muted demand and the covid-triggered crisis, real estate in India is finally showing signs of sharp recovery. As per the research published by Anarock, in Q1 22, total residential sales in the top 7 cities in India amounted to ~ 99,500 units, a massive jump compared to the same period last year when the sales totaled slightly over 58,000 units. In Q1 22, the total new launches are more than 89,000 units, jumping from the same period last year, when it was slightly over 62,000 units.  

The numbers further reveal that real estate is on a strong footing and is set for a prolonged period of strong recovery and growth. In 2021, average property prices grew modestly, at the rate of 2.5%, as per Reuter’s survey. However, property prices are expected to rise by around 6-8% on average in 2022. The upcycle in prices are expected to continue till 2024.  

The Time is Opportune to Invest in Real Estate

As real estate has once again become the mainstream after being on the sidelines for a while, the time is opportune to invest. Especially for the investors who are looking for a risk-free asset to park their money. Prices are still low and there is ample headspace for capital appreciation. In the next 2-3 years, one can easily make a capital gain of around 16-22%.

Likewise, real estate also has added benefits of making recurrent rental income and avail benefits in income tax returns. The average rental yields from residential are moderate and mostly in the range of 2-4%. However, there are specific asset classes such as student housing, rental homes, and co-living space that can render higher rental returns.

During covid times to arrest the decline in sales, major developers in India came up with relaxed and attractive payment schemes such as cash discounts, waiver schemes (GST/ Stamp Duty), free parking spaces, assured rentals, etc. Many such plans are still floating in the market but could be rolled back with the market reaching normalization. Hence, it will be a smart decision to make use of them now rather than waiting.

Volatility in other asset types

Baring the stock market, most of the other popular alternate assets are in a tailspin. The Bloomberg Global Aggregate Index has plummeted by 11% on March 22 in comparison to its peak on Jan 21, indicating one of the biggest losses in the history of the bond market. The bullion markets are still volatile. FD rates mostly remain unattractive.

Amidst such shifts, real estate continues to be a viable option for investors. It is an evergreen asset and this is one of the reasons more than 80% of the household income in India is parked in it. In contrast, only ~ 5% are directed towards the stock market.

It is a hard asset and can be a good hedging strategy against rising inflation. In addition, the downside risk of a possible price increase by developers can’t be overruled. Cement, steel, and energy prices are moving upwards. The situation might worsen amidst the Russia-Ukraine tension which can result in a further rise in petroleum prices. Amidst a price rise, developers won’t have an option but to pass it on to the homebuyers.

Shubham Arora, is Director, Sheerbulls India Pvt Ltd. Views and opinion expressed in this article solely belong to the author and do not represent SquareFeatIndia.

Also Read: Residential demand in Mumbai increases 15.2 percent

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By Varun Singh

There are more than 15,000 complaints against developers from all the districts in the state of Maharashtra.

But there’s one district which has the maximum number of complaints.

We will tell you the details but before that let us tell you, that these complaints are filed by homebuyers with MahaRERA and a research by SquarefeatIndia.com has shown that a total of 15,949 complaints were registered against projects with the housing authority.

There are six divisions under which the entire state is divided by MahaRERA they are Konkan, Amravati, Aurangabad, Nagpur, Nashik and Pune.

These divisions have district in them and total number of complaint registered in these districts are 15,949.

Lets start with the district wise complaints and the details are here.

• Ahmednagar has 11 complaints
• Akola has 1 complaint
• Amravati has 9 complaints
• Aurangabad has 50 complaints
• Chandrapur has 1 complaint
• Jalgaon has 5 complaints
• Jalna has 1 complaint
• Kolhapur has 18 complaints
• Mumbai city has 1011 complaints
• Mumbai suburban has 5985 complaints
• Nagpur has 146 complaints
• Nanded has 1 complaint
• Nashik has 97 complaints
• Palghar has 985 complaints
• Pune has 3462 complaints
• Raigarh has 985 complaints
• Sangli has 2 complaints
• Satara has 51 complaints
• Sindhudurg has 26 complaints
• Solapur has 47 complaints
• Thane has 3155 complaints

So of all the districts the majority of complaints are in Mumbai suburban district where 5985 complaints are registered. Pune is a distant second with 3462 complaints and Thane has a total of 3155 complaints.

The aim of MahaRERA is to bring in transparency and this is one of the ways to get things clear for homebuyers, who can visit the website get the details and before making investment can take an informed decision.

Also Read: Warrants of Rs 702 Crore Issued against 271 Realty Projects

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With the real estate sector contributing nearly 40% of all Green House Gas emissions, it is time to think green, and as such the sector is seeking to transform itself into a more responsible asset class. As a result, sustainability has gone mainstream now and has become an agenda in most boardroom discussions. A clear consensus has emerged that environmental impact can potentially have an adverse impact on businesses in the long run.

Strong value creation being made possible through sustainable practices, green certifications, and operational efficiencies at a project level is well recognized. Sustainability now features among the top 3 considerations for occupiers during site selection alongside location and rentals.

According to JLL’s report  Sustainable Real Estate: India’s response to a greener future, 87% of occupiers in our Pan India survey and 78% of the investors accept that ‘climate risk poses a financial risk’. Sustainability has gone mainstream for occupiers in India and real estate is at the core of it. 87% of those surveyed say the link between CRE (Corporate Real Estate) and sustainability is a board-level agenda, and 81% say that real estate is a game-changer in achieving the sustainability agenda.

Occupiers in India are ahead of investors on sustainability ambitions, with the majority of occupiers,  82%, either leading or on the path, against 66% of investors. 7 in 10 occupiers surveyed have carbon emission targets as part of their corporate sustainability strategy. The need for a more sustainable environment has led to greater demand for green buildings, so much so that demand for green buildings risks outstripping supply in India today.  And the good news is that 7 in 10 occupiers are willing to pay a premium to lease green-certified buildings.  Due to the higher demand for green buildings, retrofitting today presents the biggest challenge and opportunity. Half of the landlords (5 in 10 ) want to actively undertake retrofitting and adaptation for building lifespan extension. However, the need of the hour is a partner ecosystem to accelerate the race to net zero. The majority (9 in 10)  surveyed believed that a strong partnership among cities, investors, and occupiers is necessary Closing the technology and data gap will be crucial. 9 in 10 agree that digital solutions will be critical in achieving sustainability goals.

“Sustainable future in general and ambitious net-zero commitments in particular cannot be achieved without the ecosystem coming together with a collaborative approach. 96% of stakeholders in the research survey agree that collaboration among policy influencers, investors, developers, and occupiers will be instrumental in achieving these ambitions. It is not surprising hence, that sustainability has gone mainstream, and real estate is at the core of it. 90% of respondents of our survey believe that the link between CRE and sustainability is a board-level agenda,” said  Sandeep Sethi, Managing Director –Work Dynamics, West Asia, JLL

It is also important to note that as per the survey, 65% of corporate occupiers and 50% of polled investors have already incorporated carbon emissions reduction as part of their enterprise sustainability strategy.

• 9 in 10 respondents believe the link between CRE and sustainability is a board-level agenda
• 7 in 10 occupiers surveyed have carbon emission targets as part of their corporate sustainability strategy
• 82% of occupiers are either Leading or On the Path, against 66%  of investors
• 7 in 10 are willing to pay a premium to lease green-certified buildings
• 5 in 10 want landlords to actively undertake retrofitting and adaptation for building

lifespan extension

• 9 in 10 believe a strong partnership among cities, investors, and occupiers is necessary
• 9 in 10 agree that digital solutions will be critical in achieving sustainability goals

Real estate takes its first steps

“India has a big road ahead to be net-zero carbon by 2070 and will need to start with smaller steps. With corporates already committing to aggressive zero-emission targets within the next decade, the built environment will need to keep pace. Investments in technology to measure and accurately report emissions will be as critical as defining clear achievable goals within specified timelines,” said Dr. Samantak Das, chief economist and head of research and REIS, India, JLL. 

“Employees will significantly drive the corporate sustainability agenda by pushing for greater participation and clearly wanting to work for firms that establish their credentials as responsible leaders. The push from employees will further create the right motivation for employers and asset owners to introduce sustainability features if they want to remain relevant while creating asset enhancement opportunities,” he added

Ambitious decarbonization goals need a multipronged, actionable strategy at a firm level, the report states.  A significant opportunity lies in tackling the carbon emissions from real estate, whether owned or leased. Recognition of this fact is clear given that 96% of occupiers agree that real estate is a game-changer in achieving the net-zero carbon agenda. Furthermore, for 77% of occupiers, carbon emissions reduction is specifically part of their real estate strategy. A majority of occupiers (93%) agree that they will proactively prioritize locations that help them reduce carbon emissions in the future and investors (65%)agree that they would prioritize investing in cities that are climate change progressive.

Most companies when they state their aim for net-zero, they are usually talking about targeting emissions that come from their own operations; classified as Scope 1 and Scope 2. Other emissions from sources not directly controlled by an organization, including emissions from suppliers and customers or, the Scope 3 emissions, are often overlooked. In our survey, we found that among those who had already adopted net-zero targets, only 45% included Scope 3 emissions as part of their plans. If companies do not look at the full impact of their products and services-including the Scope 3 emissions – the world will not stay on track to achieve the ambitious goals set by the recently concluded COP26 in November 2021.

57% of occupiers have already achieved green building certification and 40% aspire to have market recognized sustainability certification for their portfolio by 2025. Two-thirds of all occupier respondents say that they are already paying a 4-10% premium on rents for sustainability certifications. This trend is set to continue as 92% of respondents are willing to pay a rental premium to take up certified office buildings.

This validates the belief held by investors that green certifications drive higher occupancy, higher rents, higher tenant retention, and overall higher value for the asset. As a result, when building or buying assets, investors prioritisebuil dings with green certification. We also found that overall, LEED (Gold level) certification is most sought after in India.

In Conclusion

Sustainability as an economic risk has become the dominant discussion point across board rooms. It has the ability to transform business, industries, and society. Real estate can be the medium of big change by its innate existence across all sustainability-driven concerns and offer tangible solutions. It is a high-impact segment towards reducing global greenhouse gas emissions. The sector can not only bring about change through reimagining the built environment, but it can also have a positive impact on the health and wellbeing of employees, customers, and residents by promoting social sustainability, accessibility, inclusivity, and diversity.

We are coming to the realization that transitioning to a low-carbon economy while being critical is also a complex journey. A partnership ecosystem is essential to achieve sustainability targets, with city regulators playing a key role in enabling the decarbonization of the built environment along with investors, landlords and occupiers. India has a big road ahead to be net-zero carbon by 2070 and will need to start with smaller steps. With corporates already committing to aggressive zero-emission targets within the next decade, the built environment will need to keep pace. Investments in technology to measure and accurately report emissions will be as critical as defining clear achievable goals within specified timelines.

Also Read: The evolving face of human capital in the hospitality industry

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We often read about ‘spillover demand’ in real estate. This is a technical term used to describe a very important dynamic related to property demand in growing cities like Pune. It is pertinent for both end-users and investors, so let us examine this term further.

Spillover demand is the process where real estate demand for one location ‘spills over’ or extends into another location/locations. This usually happens because the ‘parent’ location has become over-developed and/or too expensive for budget-conscious homebuyers. In real estate, spill-over demand gets pushed from over-developed, hyper-expensive locations to surrounding areas that still have development potential but still offer all the location advantages.
 
Old Gives Way To New
A location that saw very healthy demand and supply in previous years will not be able to sustain this demand and supply indefinitely. With increasing demand, more and more builders will have developed projects there and prices will have kept rising. Inevitably, at some point, the area will either have depleted its available land or prices will have gone too high to be attractive to most buyers.

When this happens, the location is deemed to have reached a point of demand and supply saturation. In Pune, we saw this dynamic at play in areas like Kothrud, where the high demand for homes there spilled over to Paud Road, and Kharadi and Koregaon Park, from where demand has spilled over to areas like Mundhwa – especially the more affordable Keshavnagar area.

Likewise, Baner eventually became too densely developed and too expensive for mid-income homebuyers working in the Hinjawadi IT Park, so housing demand spilled over to nearby Punawale.

Sometimes, the new area benefiting from spillover demand becomes even more attractive than the ‘parent’ area. For example, Baner initially saw a lot of demand because of its proximity to the Hinjawadi IT Park. At the time when Baner was developing, the integrated township model was still not well known. After it became saturated with smaller projects, there was no scope anymore for building new integrated townships.

Learning From Mistakes of ‘Parent’ Locations

When Punawale caught Baner’s spill-over demand, it still had a lot of land available and leading developers introduced the integrated township model there. Today, Punawale is home to one of the largest and most modern townships in India. This model has become a favourite with homebuyers after the Covid-19 pandemic because homebuyers now wanted everything available within a short walk or drive. Integrated townships have healthcare, education, shopping, and entertainment built into the blueprint.

Unlike in Pune, neighbouring Mumbai has a special problem with development growth via the spill-over effect. The main city is surrounded by the ocean on three sides, so development can only go in two directions – from the south towards the northern suburbs, and vertically. Because of this, new areas getting spillover demand from the city are further and further away.

Pune’s Advantages with the Spill-over Effect

Pune has a lot of surrounding villages and farmlands which can be absorbed into the urban agglomeration. This means that the city has sufficient space to grow omnidirectionally in a hub-and-spoke manner. The advantage is that new areas catching the spill-over housing demand from saturated locations are still well-connected to the important parts of the city.

Moreover, the Pune Metro network as well as the upcoming Ring Road will now bring all parts of the PMC and PCMC closer together with superb connectivity. People living in the new suburban areas can commute easily to Pune’s main workplace centers, so they won’t mind living in new areas where property prices are lower. It also means that their dream of living in a modern integrated township can be fulfilled.

Quite literally mini-cities or cities-within-cities, integrated townships offer homebuyers advantages that they cannot get in the over-developed and costly inner-city areas. These massive projects have their own infrastructure. In other words, well-planned inner roads, assured water and electricity supply, hospitals schools within the same premises, modern shopping outlets, and even office buildings are all part of an integrated township’s master plan.

Choosing a township property eliminates all the doubts which people often have about moving into a newly-developing area. As we have seen, some of the new locations which come up and grow due to spill-over demand and development are not always equipped to handle such growth. Along with real estate development, such an area also requires support infrastructure – without it, it will fail.

Advice for Property Investors

Do not assume that a new area near a popular location will always give returns. Check what kinds of developers are active in the new area. Are they established local or well-known national builders, or are they names you have never heard of before?

• Find out when the ‘parent’ location reached saturation point and how property prices there were moving till then. Was the price growth steady until the point of saturation?
• One way of identifying such growth areas is when builders are marketing it as ‘New XYZ’ or ‘Upper/Lower XYZ’, with XYZ being the name of an established and famous location. This is often considered a marketing gimmick – but actually, the builder has identified the next area benefiting from spill-over demand
• Check the status of infrastructure development in the area from the news, reports by property brokerages, and local government websites. This lets you find out if the area is lined up for infra upgrades which will boost property values
• Find out if a reputed developer is developing an integrated township in the location. Townships are massive investments and no developer will risk capital on a mere gamble. They will have done theri homework and determined that the area will generate enough spill-over demand to make the township viable.

Also Read: Illegal Construction MahaRERA To Inform Authorities

Anil Pharande, is the Chairman – Pharande Spaces & President – CREDAI Pune-Metro

Note: Views Expressed in the article are that of the author and not of SquareFeatIndia

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