India’s Real Estate Report Card 2021 and what the future holds

February 11, 2022Real Estate

This summary presents key takeaways from the GRI club meeting held in Feb’2022 where Dr. Samantak Das (Chief Economist and Head Research & REIS, JLL), Jaideep Dang (MD, Hotels & Hospitality Group, JLL), Chandranath Dey (Head-Operations, BD, Industrial Consulting, PAGI, Logistics & Industrial, India, JLL),  presented “India’s Real Estate Report Card - 2021 and what the future holds” to imminent club members & industry leaders.


  • The GDP is likely to expand at 9.2-9.5% growth in FY 22.

  • Nominal GDP is estimated to expand by more than 17% this fiscal due to inflation - an upside to tax collections this year.

  • Omicron to inject some uncertainty in the Jan-March quarter and could hamper a broad-based recovery.

  • For FY23, the Economic Survey has projected a growth of 8-8.5%.

  • Weak private consumption is concerning. While consumer sentiment has picked up, it still trails the pre-pandemic level.

  • Private investments are yet to pick up.

  • The increase in CAPEX announcement by the government in the Budget by around 35% could crowd in private investment.



Current trends

  • New completions (office space available for occupancy) are rising year on year, and the trend is likely to continue in 2022 and 2023.

  • In 2021, new completions were at 45.7 million sq ft and are expected to be 46-48 million sq ft and 52-55 million sq ft in 2022 and 2023, respectively.

  • Net absorption has been increasing and is expected to maintain the momentum for this year and the next one.

  • For 2021, net absorption was at 26.2 million sq ft. For 2022 and 2023, it is forecasted to be 32-35 million sq ft and 40-42 million sq ft, respectively.

  • In 2021, supply additions were more or less back on track as material and labour shortages got resolved. The third COVID wave did not have a significant impact.

  • The average net absorption for three years, between 2016 and 2018, was around 33 million sq ft. We could see net absorption touching similar levels in 2022.

  • Gross leasing fell in 2021 but will pick up in the following two years.

  • In 2021, gross leasing was down by 19%, at 33.8 million sq ft. It is forecasted to reach 44-45 million sq ft in 2022 and 53-55 million sq ft in 2023.

Trends to watch out

  • Bengaluru and Hyderabad will witness the maximum supply in 2022 and 2023.

  • Quality office spaces with sustainability ratings will be high on the priority list of occupiers since many have committed to net zero carbon emission norms.

  • India’s dominance as a tech outsourcing/offshoring destination has been strengthened by its emergence as a strong innovation and R&D hub, and it will keep office market momentum in good shape going forward.

  • Offices will remain relevant even as more companies move towards a hybrid work model.

  • Employee preferences are going to influence the real estate strategy of businesses.

  • Managed workspaces (flex) to gain further momentum as cost optimisation and the need for on-demand spaces rise with evolving portfolio strategies.

  • In the flex space segment, seats taken up by enterprises have grown 2.5 times between 2020 and 2022.



Current trends

  • Homebuyers are looking for bigger houses and flexible configurations as their residences now double up as workspaces.

  • Technology has improved buying experience.

  • Buyers are demanding green and sustainable homes.

  • Demand is likely to be resilient on the back of rising salaries, low mortgage rates, stable prices and attractive schemes.

  • Consumers prefer completed projects or those near completion by developers with a track record. Established developers accounted for more than 60% of sales in 2019-21.

  • Sales and new launches in Q4 2021 were the highest in the past 8.5 years. The quarter recorded sales of 46,750 units, and launches were at 45,383 units.

  • On an annual basis, launches and sales have registered a Y-o-Y growth of 47% and 72%, respectively.

  • In 2021, sales were 90% of 2019 levels.

  • Affordable and lower mid-sized homes accounted for 50% of new launches last year. High-end homes had 7% of the pie.

  • Hyderabad, Pune and Bengaluru accounted for 60% of the new launches in 2021.

  • Bengaluru, Mumbai and Delhi NCR accounted for nearly 59% share in sales.

Trends to watch out

  • A renewed buyer confidence will keep the momentum going in the residential market. The fourth quarter of 2021 surpassed pre-COVID-19 levels by a wide margin.

  • Developers may focus on plotted developments and low-rise independent floors. It would help them achieve faster inventory turnaround and give buyers early delivery.

  • Consolidation to play out, and marquee developers will take over projects from those struggling with completion or sales momentum.

  • Inflation could put pressure on interest rates in the second half of 2022 given pressure arising from Fed actions and India’s inflationary pressures.

  • Rising input costs will put stress on margins. Developers may absorb costs in the short term before the impact is seen in prices.



Current trends

  • Capital allocations and investments have remained strong even during the pandemic, showing the long-term outlook that global investors hold towards Indian real estate.

  • Global funds have continued to flow into commercial office assets.

  • Intermittent breakdowns in the investment process due to the pandemic impacted deal flows in 2021, leading to a 14% decline. But there are clear signs of broad-based recovery, with positive investor sentiments being seen across all asset classes.

  • There were 57 deals in 2021 compared to 27 in 2020.

  • The office segment got the highest share (31%) of the investments. Residential made a comeback accounting for 25% of the total investments.

  • The listing of future REITs is expected to drive portfolio creation across classes.

Outlook for 2022

  • Investors are likely to focus on assets with stable rental growth to ensure income visibility.

  • The industrial and warehousing sector will continue to attract investors at the development stage.

  • The Indian data centre industry is expected to double by 2023 and would witness higher capital flows to fund operators’ expansion plans.

  • Investments in residential real estate will revive due to the robust recovery.

  • Investors are making sustainability and ESG a part of their investment criteria.



  • Data centre industry size is estimated to be at 499 MW, and it occupies approximately 10.4 million sq ft of real estate. The utilisation is 436 MW and occupies 9.1 million sq ft.

  • We expect a 508 MW addition by 2023, which would require an estimated 6.3 million sq ft of real estate space and investments to the tune of USD 3.6 billion.

  • Mumbai will account for the highest addition of 305 MW followed by Chennai.



Warehousing update

  • Year on Year supply has witnessed a five-year (2016-2021) CAGR of 27% to 50 million sq ft in 2021.

  • The cumulative supply by end of 2021 was at 287 million sq ft. Of this, 47% is Grade A, and the rest, Grade B.

  • The cumulative projected supply in 2025 is expected to be around 500 million sq ft, a CAGR of over 20%. Grade A could account for 55-60% by then.

  • Despite the pandemic, the demand or net absorption has witnessed a five-year (2016-2021) CAGR of 25% to 39 million sq ft. 

  • The net absorption in 2022 is estimated to be at 46 - 47 million sq ft.

  • Of the 49 million sq ft gross absorption in 2021, third-party logistics (3PL) had the largest share of the pie (31%), followed by e-commerce (26%). FMCG, which had 6% of the gross absorption, could be a dark horse in 2022.

  • Warehousing rentals in India are lower than many Asia Pacific markets.

  • Low rentals are not sustainable considering inflation and the rising cost of construction.

Manufacturing update-Build spaces

  • Rents are higher in the built manufacturing segment and leases are for the long term, which makes it attractive for developers and investors.

  • Tenants, on the other hand, prefer built manufacturing as they can start using the facility faster and save CAPEX in such leased manufacturing spaces.

  • Government schemes like Atmanirbhar Bharat and Make in India coupled with Production Linked Incentive and One District One Product are giving a fillip to manufacturing.

  • The box sizes are growing, and in some instances, they were 600,000 sq ft.

Multi-Modal Logistics Parks

  • Multi-Modal Logistics Parks (MMLP) or Rail Linked Logistics Parks are the future of logistics parks in India. 

  • They are aligned to two national agendas—bring down logistic costs to 8%-9% of GDP and reach net zero carbon emissions targets.

  • MMLP will make the logistics sector faster, cheaper, sustainable, and could reduce long-haul transportation costs by around 45%.

  • PM Gati Shakti initiative needs to play an essential role in unifying different ministries and stakeholders to achieve the national goal.

Cold Storage

  • The pandemic has changed the dynamics of food and groceries, QSR, pharma, and other industries, and there's a growing demand for cold storage.

  • At present, the majority of the demand is from fruits and vegetables, which accounts for 81% share, followed by meat, poultry and dairy. Pharma accounts for a minimal 1% of cold storage pie.

  • The national cold storage sector is expected to grow at 20% CAGR over 2021-2025.

  • There's demand for 200,000 pallet positions in the palettized cold storage sector.


  • In 2021, occupancy levels across the top nine Indian cities witnessed a growth of 12.8% compared to the previous year.

  • Average daily room rate (ADR) registered a decline of 13%, and Revenue Per Available Room (RevPAR), at INR 2,130, reported an increase of 17% compared to 2020.

  • Most of the demand was driven by Indian leisure travellers, which will continue to grow. Business travel and off-site, too, saw a pickup last year. We also saw overseas destination weddings shifting to India.

  • Domestic leisure travel will continue to grow in between waves and the average length of stay will continue to increase. Resorts at drivable distances from major cities will continue to perform well and register high occupancies and rates over weekends.

  • Business travel and off-sites could be the highlight of 2022 and would benefit leisure as well as business hotels, especially in the top 10 hospitality markets.

  • The recovery was, however, patchy, with some markets doing well and some didn't.

  • The existing supply is at 5,430 hotels and 325,860 keys. Of these, banded hotels are at 2,160 and their keys at 171,984.

  • With several developers rationalising their developments in the current environment, new hotel supply in the country is anticipated to slow significantly over the next two to three years.

  • We will continue to see activity shift to tier-2 and tier-3 cities and leisure markets. Of the proposed supply, 55% inventory is in tier-2 and tier-3 markets.

  • Today, hotel buyers are long-term players looking for strategic opportunities for growth.

  • Due to the challenging operating environment, there could be consolidation, and valuations are likely to see some rationalisation.

Member’s views on hotels and hospitality

Dr. Niranjan Hiranandani: On many occasions, hotels in Goa, Shimla, Khandala and some other areas were full. Theirs is a niche opportunity in some tourist destinations.

If formats like Airbnb are doing better business during the COVID time, hotels should relook at their layouts and build more units like those offered by Airbnb.