The real estate sector has been in sharp focus. The questions on every industry watcher’s mind now are what’s in store for office spaces, will residential realty gain momentum shortly, how does property work now as an investment avenue and with REITs and InvITs figuring prominently in the Union Budget 2021, will the realty sector witness traction with easier access to funds.
Irfan Razack, Chairman and Managing Director, Prestige Group, throws light on the prospects of the property industry, in this chat with B S Manu Rao.
The pandemic is receding in India and the vaccine is out too. What’s your outlook for commercial real estate this year? Do you see those on WFH moving back to offices soon?
I believe once all companies feel that it is relatively safe for the entire workforce to return to the offices, life will be back to its normal - of course, practising safety – mask, hand wash,
hygiene and social distancing. ‘Work from Home’ as a trend cannot continue for too long and for collaborative team work, returning back to office is the only solution. We can hope to see the workforce return to office in the last quarter of this year. The outlook for commercial real estate is strong. There will be growth and demand as more work will come to India. This in turn will lead to higher take-up of space. However, this will happen towards the end of the year.
Has Covid-19 changed the face of office spaces - safety measures, focus on health - for example? What sort of changes are you expecting in large workspaces such as tech parks?
Yes, a lot of changes will need to take place, starting from sanitising, temperature checks and masks, larger and more spaced-out workstations, and lesser contact points in public areas like lifts and toilets, will be the order of the day. The air conditioning too will undergo a transformation and air ozonisation would need to be done.
What’s on the cards in the residential property market? Do you see demand picking up in the coming fiscal? Which sectors do you feel will drive demand?
Surprisingly, residential property demand, contrary to expectations, has picked up very briskly. All segments and types of homes are now selling and people are committing
themselves to buy. The last two quarters has seen a spike in sales across all cities and the mood to buy homes is positive.
Some of the factors that have led to this are:
- The realisation that you need to own an asset, in the city of your choice.
- The pricing of the properties is attractive and lot of choice is available to the
consumer.
- The interest rates are at the lowest.
Is property a good investment option at this point in time?
Property as an investment at any point in time is always a good option, as long as it is for the long term and not speculative buying. Today, many options and schemes are available to
buyers, which should help them make their decision quicker. Investment in property is far better than holding liquid money in deposits. Over a period of time, with inflation catching
up, the returns will be multi-fold in property investments.
There is some push In the Budget for Real Estate Investment Trusts and Infrastructure Investment Trusts. Will this lead to more and cheaper funds for property developers and therefore lower cost for homebuyers?
The Budget has only made it attractive for foreign funds to invest in Real Estate Investment Trusts (REITs). Apart from this, REIT is an amazing vehicle for all those who have a smaller
ticket size and want to invest in property to get a rental income, without the hassle of worrying about paying property tax, maintenance etc. When you own office property individually it is illiquid, but owing units in a REIT has the advantages of both owing the property as well as instant liquidity in case of need. The REIT vehicle is a good option for all investors who want a piece of action in the commercial real estate sector.
Will the manufacturing-centric initiatives in this Budget lead to more traction for the property industry - especially industrial and logistics, and residential as a cascading effect?
All economic activity has a positive effect. It churns the economy. More jobs, more money in the hands of the people, will lead to more spending and this can percolate to retail spending
as well as encourage home-buying. More manufacturing and industry also means demand for industrial parks as well as warehousing and logistics parks.
Do you believe the start-up story of India will pick up once again? What’s your outlook for co-working spaces in the medium term?
Co-working workspaces are bound to witness an interest in the post-pandemic situation as they have various benefits to offer considering the new and refined demands of small and
large businesses. Business and start-ups will pick up once again as India strives to get back to normal with proper implementation of distribution of vaccines.
With the thrust on infrastructure in the Budget, do you see an opportunity for property developers in the infra space?
With infrastructure being propped up in the Budget, we can expect the stress to be reduced on the existing infrastructure and there will be expectations of better public transport thus
increasing mobility among the masses. In my opinion, this in turn will encourage the development of spaces that are away from Central Business Districts (CBDs) and thus ensure cities that aren’t developed in certain specific pockets like the city centres alone. A better community living, as a result of such reforms, is possible. It will certainly help the supply side for housing, and create more liveable and clean cities, and urban areas.
What does the realty sector need most at this point in time for strong revival?
Overall, I think GST reforms in the form of input credits, stamp duty reduction and funds for infrastructure developments will boost and ensure strong revival in the real estate sector.
Additionally, there is a specific need for income tax relief on a second home which will benefit homebuyers immensely and also stimulate the real estate sector.