JOIN USThe present Union Government has been clear with its mandate of improving the business conditions across the country. Foreign Direct Investment (FDI) being the major contributor, the ease of doing business plays a vital role for the investor.
Hence, a lot of policy changes have been initiated to facilitate this transition. Today, we are looking at the ease of FDI participation in the real estate sector. The Goods and Services Tax (GST) Bill is all set for implementation and we can look forward to the Real Estate Investment Trusts (REIT) which can create an impact on this sector. The recent demonetisation has also seen positive developments.
Let us look at each of these factors which are vital for the commercial sector, the strong positive correlation between the residential sector growing alongside the commercial sector and the developments in the retail sector.
The encouragement towards the software industry by providing land, incentives and tax holidays led to early growth of Information Technology/Information Technology enabled Services (IT/ITeS) in Bengaluru, because of which large portions of land were allocated to this industry. Looking backwards, one can see how Electronics City, Bellandur and Whitefield have played a major role in the growth of residential sector in this pockets as well.
Thanks to the mass migration of workforce to Bengaluru from all over the country (as well as the world), the City is one of the best examples of cosmopolitan culture. This has led to the increased demand in residential spaces.Till date, most of the customers are first home buyers.
Recent times
If you look at the last three quarters, Bengaluru has been leading pan-India in terms of commercial space absorption, and this trend is likely to follow in the present quarter as well. The major absorption is from IT/ITeS, followed by the banking, financial, services and insurance industry (BFSI), manufacturing industry and even start-ups. These trends also have a bearing on the housing market. Across the country, Bengaluru has arguably been the most stable market because of strong growth in the IT/ITeS spaces, resulting in good supply of first home buyers.
The builders have also developed the retail spaces in these pockets ensuring that the liveability factors score well.So far, Bengaluru was only seen as the place for outsourcing. But we can now expect the next wave of change where the major players are coming up with their full-fledged facilities; for example, Apple is looking at one of their units to be operational from Bengaluru.
This not only fuels further migration, but there can also be trends of reverse brain drain. Adding to the above, the e-commerce players also have taken up huge spaces across the city. The budding startup culture will surely add to the growth alongside the IT/ITeS.
The above factors also encourage a lot of investors who would look at the rental returns and REIT can be the next big game changer in this space. This repeated cycle has seen Bengaluru posting encouraging numbers from the past two decades and promises to carry this trend further as well.
(The author is MD, Century Real Estate Holdings)