Realty 2023: Taking Off on a Positive Note

Vinod Behl

Shrugging the negative influences to show strong resilience and robust performance in 2022, real estate ushers in 2023 on a strong wicket, with good prospects for healthy growth.

What is really striking is the strides being made by residential real estate in its onward march , especially after its remarkable recovery in 2022, despite being badly hit by Covid pandemic.

That residential realty is well on its growth trajectory , can well be judged from its creditable performance. Residential real estate recorded the highest annual sales of 215000 units in 2022, witnessing a YoY growth of 68 percent which is  highest over a decade. The launches ( 247000) also created a decadal record. And as per the December quarter PropIndex , there was property appreciation of 13.9 percent. In this bullish backdrop , developers are embarking on their expansion plans with a land buying spree.

Going forward in 2023, there will be a temporary short term turbulence because of further weakening of home affordability due to another round of expected repo rate hike. But  from the second quarter of 2023, there might well be a halt to any further repo rate hike in view of moderating inflation and the need to push growth. This should pave a smooth path for residential realty.

For commercial office real estate, 2023 starts on a happy note on the back of 40 percent YoY growth in absorption at 56.6 million sq ft, marking the second best leasing performance  since the  peak performance of  65 million sq ft in 2019, . What is significant  about office realty’s growth trajectory is that domestic firms have over 50 percent contribution amidst rise in the share of BFSI , engineering and  manufacturing companies.

The take up by flexible space , a significant contributor, will further go up in 2023. We will be seeing persistent demand for investment grade  assets from occupiers and institutional investors, especially as global corporations will be taking advantage of the cost-effective office spaces and skilled manpower to optimize their operations. All this bodes well for the sustained growth of commercial office real estate with Mumbai, Bangalore and Delhi- NCR turning out to be big growth drivers.

The retail real estate story in 2023  too looks equally promising. as the mall supply of 10 million sq ft is expected to be added this year against 2.5 lakh sq ft of supply last year,  largely driven by Delhi- NCR and Bangalore. With superior-grade quality retail space in the pipeline from established developers and growing institutional investment, 2023 bodes well for retail realty.

Overall, with a favorable economy, moderating inflation and healthy demand-supply dynamics, a supporting FY 24 budget should be able to sustain real estate growth in the coming quarters.