Indian realty growth will come from Tier II/III towns: NAR President Shiva Kumar CR

With a seat in the central advisory committee of the National RERA Council and presence in 16 states (45 cities), the India arm of US-headquartered National Association of Realtors is working to train/educate realtors and bring in a standard examination for their qualification. Shiva Kumar CR, president, National Association of Realtors India sat down with DH’s Shakshi Jain to discuss challenges that realtors presently face in India, his outlook on office space leasing in the country this year and growth prospects in tier II/tier III cities of India.

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Edited excerpts.

What is your outlook for office space absorption in India given the recessionary trends in the West ?

Office space absorption in India has been significant post-Covid-19, barring a few states like Telangana. In a market like Trivandrum - a tier II town - a REIT got listed for 2 million square feet and it got subscribed. So, why should one not be optimistic about this. The internal consumption that India has in the startup ecosystem, is very high.

I see recession as an opportunity, where people cut costs, they say go back to your city or go back to your country and start working from there. So there is opportunity there also.

Hyderabad is a worrying factor, but I think that will be corrected. For the cost that Hyderabad is peaking on, the returns that somebody is going to get, it doesn’t match.

Do you see foreign investments being impacted this year ?

No, I don’t, because if you see the recession chart that was published by Bloomberg, India has zero recession. Foreign investors would go to a place where there is no impact, right ?

What about realty growth prospects in tier II and tier III cities of India ?

Retail and logistics are something that have seen great expansion into tier II and tier III cities. If you read the (local) IT policies the capital subsidy offered are significant. In (Gandhinagar’s) GIFT city, the IT infrastructure is superior and for every 1,000 square feet that you absorb, you get at least 60 per cent of capex given to you. In Bhubaneshwar up to Rs 25 crore capital subsidy is given to set up an IT infrastructure. So every state believes that the towns, the district headquarters are very important and every state is devising the policy in such a way that people set up these ecosystems there.

These towns will be the growth of India, at least for the next 10-15 years. All tier II, tier III cities have grown post-Covid-19 at an annual average of 10-12 per cent.

Which are the tier II/tier III cities that you see with best prospects and why?

In 2023, a larger portion of investments will be directed towards tier II and tier III cities in India. Every region has some cities expected to do very well in select sectors. South India has Visakhapatnam, Trivandrum and Coimbatore.

Elsewhere there are cities such as Ludhiana, Ambala, Lucknow, Patna, Siliguri, Bhubaneswar, Indore, Jaipur, etc, which have witnessed tremendous growth as manufacturing hubs and thereby become potential destinations for warehousing clusters. It is safe to predict that the future growth of the warehousing sector in India is set to be in the tier II and III towns. Guwahati being the gateway to the North-east is also expected to see growth in the sector.

What are the critical challenges facing realtors in India today ?

The single most important challenge today, is the market - it is still a mixed economy, there is cash and there are also digital transactions done right now. By 2026, every second transaction in India will become digital. When that happens, the lack of consumer trust in realtors goes away. The second challenge is information flow from the government. A lot of schemes come, like the Swamitva scheme which gives me access to all village maps across the country. Some states have adopted, some states have not adopted, some states have not given free access to all the records. The moment these records are made available to realtors, then it becomes easier to give reports to the consumers.