India’s Commercial Development Poised to take off in 2021
Ved Prakash Dudeja, Vice Chairman, Rail Land Development Authority
We are all set to welcome the New Year with a renewed vigour as the Indian economy is taking rapid strides towards normalcy. After over five months of stalled economic activity, the Unlock phases and the recent festive season provided the much-needed push to the economy. Equally significant was the government’s role in keeping the economy afloat amid the pandemic.
Infrastructure and real estate form the backbone of economic development. Both figure prominently among the 26 sectors that have been granted the Emergency Credit Line Guarantee Scheme (ECLGS). The loans extended under the ECLGS scheme will play a pivotal role in accelerating the revival, protecting jobs, and boosting employment generation. Moreover, the government has also announced tax relief for developers at an opportune moment of the festive season. The relaxation in financial and technical specifications for bidders of national highway projects under the hybrid annuity model (HAM) and builds, operate, transfer (BOT) mode will provide a fillip to infrastructure development. The impact of the initiatives is now being felt in the commercial segment. A JLL report predicts that there has been an increase in net absorption by 64% and new completions by 59% in Q3 2020.
In 2021, one can expect an acceleration of economic activity and renewal of consumer confidence amid the fast-tracking of COVID-19 vaccine development. A Knight Frank report predicts the commercial yields in Mumbai, Bengaluru, and NCR to remain stable in 2021, indicating the resilience of the Indian real estate sector. The focus on leveraging emerging technologies such as Virtual Reality, Augmented Reality, among others, will be paramount in improving operational efficiency for businesses and offering personalized experiences to customers. Amid hygiene and wellness concerns, facility management and operations will be the key to regaining customers’ confidence. The implementation of REITs has streamlined the process of investment in commercial real estate and the attractiveness of the REITs listed in India vis-à-vis global counterparts imply that commercial realty will continue to be on investors’ radar in 2021 as well.
Besides commercial development, monetization of land and upgrading amenities and infrastructure in cities beyond the metros are among the viable pathways to unlock India’s growth potential. The land redevelopment will create independent economic engines across the country, leading to the generation of employment and have a cascading impact on industries such as tourism and hospitality that had been hit by the pandemic. It will also augment the revenue stream for government undertakings.
Land redevelopment in areas that were previously underexplored or need critical infrastructure is also likely to generate interest from businesses that are looking for new avenues to expand their footprints, such as real estate developers and commercial service providers. The process of upgrading runways at airports and redevelopment of stations has already begun. In fact, the station redevelopment programme itself is being seen as a huge opportunity by the prospective developers.
The New Year will accelerate the process with the discussions around the formation of an apex authority to attract investment in the pipeline. The development of the first multi-modal hub in Assam, the proposed logistics hub and a datacenter park will also have a multiplier effect on the economy.
Buoyed by political and economic stability, thrust by the government, and restoring of confidence, the outlook for the commercial realty is positive in 2021. The infrastructural push and redevelopment of public amenities will further push the economy onto a higher trajectory.