India’s real estate sector is the single-largest employer in the country and is expected to contribute substantially to India’s GDP in the next few years. The real estate sector comprises four main segments—housing, retail, hospitality, commercial, and a fifth growing sub-sector, viz. warehousing. The growth of the real estate sector is heavily dependent on the corporate sector driving demand for office space, as well as urban and semi-urban accommodations. Retail, warehousing, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure boost. In the calendar year 2019, a large parcel of commercial office space was delivered across the country which is among the highest in any period till date. Within real estate, two distinct growth trends are also visible, namely affordable housing, which is supported by government subsidies and interest rate subventions, and the emergence of co-working spaces that is further driving commercial real estate absorption in the country.
Apart from the significant growth of co-working spaces, the changing perception of real estate is also driving the market for niche residential segments, such as co-living, senior living and student housing. The government has also taken several initiatives to encourage the development of the real estate sector by announcing certain amendments in the taxation and regulatory framework. Plus the implementation of RERA, Benami Transactions Act and other structural infrastructure reforms should propel the real estate sector on the fast track in the next couple of years. Demand for office space has been on the rise on the back of significant growth in demand for office space from the IT/ITES sector.
Furthermore, Real Estate Investment Trust or REIT is expected to facilitate further investments in the Indian real estate market. Real estate companies have seen their stocks doing fantastically well in the last calendar year, including real estate giant DLF Ltd. The company reached a milestone in 2019 with its rental portfolio of retail (4 mn sq ft) and office (29 mn sq ft) space touching 33 million sq ft on the back of commercial real estate market gaining traction.
This would increase by a further 18 mn sq ft in the next few years on the completion of DLF Downtown Gurugram and DLF Downtown Chennai.
Furthermore, the company is proposing to build IT parks in Pune and Noida for which a final feasibility is being carried out. The company has an excellent land bank and is exploring opportunities to encash and develop them in the right time. Backed by positive fundamentals, sustained growth in commercial office space and better demand projections, the DLF Ltd stock is poised for sustainable growth trajectory over the next few years. Analysts and fund managers are bullish on the DLF stock currently priced at Rs 225 to appreciate around 30% by March 2021.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.
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