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    Real estate prices likely to start recovering in select micro markets, projects, report

    Synopsis

    It expects office leasing to remain muted over the next 2-3 quarters as occupiers are currently focusing on recalling employees back to office, which will take at least 4-5 months.

    realty-developersAgencies
    The brokerage’s outlook on pricing is based on its interactions with property consultants and select real estate developers.
    Property prices are likely to start recovering in select pockets and projects after remaining flat for the last 6-7 years. While developers will keep a close eye on how the inventory position pans out, prices may rise 4-5% on a compounded annual growth rate (CAGR) of over the next 4-5 years, said a stock broker Motilal Oswal Financial Services.

    The brokerage’s outlook on pricing is based on its interactions with property consultants and select real estate developers.

    It expects office leasing to remain muted over the next 2-3 quarters as occupiers are currently focusing on recalling employees back to office, which will take at least 4-5 months.

    The leasing cycle will return once global office occupancies are back to normal, which will take at least 2-3 quarters. Tenants are increasingly focused on employee hygiene and wellness, which means that demand for Grade-A offices will remain in favour, the brokerage said.

    While the near-term outlook remains muted, the long-term view remains positive as 50%/85% of global and domestic companies are expected to grow their real estate portfolio by more than 30% over the next 3-4 years, Motilal Oswal Financial Services said citing a CBRE survey.

    Supply has remained stagnant at pre-COVID levels of 40-45 million sq ft annually, while rentals have remained unchanged for a large part of last year, but saw a 3-5% correction in the second quarter of 2021.

    Stronger players have withstood the cash crunch, while a significant number of players have left the industry. Over the next 6-12 months, supply will continue to be restricted to large listed and private players. Large expansions are expected only from these players, while smaller players will consolidate. Over the long term, 20-25 players are likely to dominate the market as against the current developer count of 400-500 players across markets.

    The demand momentum has picked-up over the last two months, continuing from where it left before the second COVID wave, and has absorbed a large part of the completed and near complete inventory across markets. Consumers have realized the importance of home ownership and upgrading demand, backed by strong IT hiring and salary revisions has led to a strong pickup in demand.

    The demand-supply balance will ensure the recovery has more legs. Further, Infrastructure development is leading to incremental habitable locations in urban centers, making sure that demand for housing is here to stay, the brokerage said.


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