Election impact on demand anticipated to be moderate: Shishir Baijal

The general election is likely to have only a moderate impact on individual demand within the real estate sector in India owing to underlying positive sentiment and governmental policies, Shishir Baijal, chairman and managing director, of real estate consultancy Knight Frank India, tells Raghav Aggarwal in an email interview. Edited excerpts:

What caused the real estate boom in the past two years?
 

This resurgence was catalysed by a combination of factors: consumers gravitating towards properties that accommodate a diverse range of activities; governmental measures to counter the economic impact of the pandemic; sustained low interest rates; growth in global capability centres; the global China Plus One strategy, to list some.
 

How long will the real estate boom likely last considering global politics and economics?
 

India’s growth trajectory, particularly over the past three years, initially propelled by robust governmental initiatives, has now transitioned into a self-sustaining momentum, characterised by the consistent demonstration of robust and resilient trends within the domestic market. 
 

This resilience persists despite adverse fluctuations in lending rates, a general uptick in inflation, and ongoing global economic and geopolitical instabilities.India maintains its position as the world's fastest-growing major economy, outpacing numerous developed nations, thereby serving as a beacon of growth amidst prevailing global uncertainties. 
 

The concerted efforts of the Reserve Bank of India to mitigate inflationary pressures have engendered a stable or declining interest rate environment, which is poised to continue fostering confidence among prospective homebuyers and commercial tenants throughout the year 2024.
 

How are private equity deals in the real estate sector doing?
 

In 2023, private equity investments in office, residential, and warehousing amounted to $3 billion, marking a significant 44 per cent decline from the preceding year. 
 

This downturn can be attributed to prudent investor sentiments in light of prevailing global uncertainties and elevated interest rates. 
 

Nevertheless, emerging trends such as diversifying into alternative asset classes and prioritising sustainability and technology integration are reshaping the sector's landscape.
 

Despite these challenges, India's real estate industry continues to hold allure for private equity investors. 
 

As global uncertainties gradually abate, the robust Indian economy and favourable real estate fundamentals are anticipated to bolster private equity inflows into the sector.
 

How will the residential sector perform after the elections? Will the election outcome affect it?
 

It is evident that the real estate sector, encompassing residential properties, has reached a phase of self-sustained growth. 

Under stable economic conditions, this trajectory is expected to persist. 
 

India’s GDP growth remains robust and resilient, attaining a level of maturity that enables it to withstand transient challenges effectively.
 

Consequently, while the forthcoming elections constitute a pivotal geopolitical event, their impact on individual demand within the real estate sector is anticipated to be moderate. 
 

This prognosis is grounded in the understanding that the underlying positive sentiments and enduring governmental policies will sustain latent demand for real estate assets.
 

In summary, the real estate market’s current state of self-sustained growth, buoyed by India’s resilient GDP performance, suggests a capacity to weather short-term fluctuations, including those associated with electoral dynamics.
 

This underscores the enduring attractiveness of real estate investments in the Indian context, bolstered by ongoing governmental initiatives and favourable market sentiments.
 

With people returning to offices, will the demand for flex office spaces decrease?
 

As businesses resume operations post-Covid, the demand for office spaces, including flex or managed office solutions, is expected to escalate. Flex spaces offer lower capital expenditure and operational expenses while providing flexibility, making them a preferred option for diverse office requirements.