Real estate strategy consulting have identified the current and emerging issues expected to have the most significant impact on real estate in the coming years. The following are the greatest concerns listed below affecting real estate solutions
Infrastructure is one of the top three issues affecting the real estate industry. The building of roads, bridges, tunnels, railways, airports, the power grid and water supply are extremely influential during a purchase. Crumbling infrastructure definitely impedes economic growth, and is a daily annoyance if inadequately provided. Thus limitations in infrastructure hamper demand and supply and reduce economic growth.
The issue affordable housing is central to the discussion as there is a stress on developers and grave concern for buyers with lower-income, or even lower-middle-income housing to afford a home in tier-1 or tier-2 city. Especially families of migrating employees and professionals face difficulties in securing an appropriate place to live in big cities moving in from smaller towns or rural areas Also the Millennial entering the workforce in thriving cities can’t afford apartment rents as they too have soared beyond their capacity. Locations in neighborhoods reasonably proximate to their workplaces usually have higher demand and thus are less affordable. Furthermore, the liquidity of the housing market has been compromised since finding buyers for homes has become difficult.
Tech is in great demand and drives the capital markets, use of space, leasing, brokerage, valuation, and building operations. Technology is capable of making the actual location of a business less important. It’s no surprise that technology is a Top Ten issue since it affects nearly every area of our lives and the business of real estate is no exception. Real estate has had somewhat of a different technology adoption path compared to other industries because of the bifurcation between the back-office technology and the “front of house” technology in our buildings. While leveraging many IT attributes, the buildings themselves used a different type of tech called operational technology (OT). The OT building control systems such as HVAC, elevator, lighting, and parking work on and depend on computer servers, operating systems, protocols, local area networking (LAN) and remote Internet access. Those responsible for designing, installing and maintaining them for the past 40 years have neither IT nor cyber security skills. Thus, in addition to the bifurcation issue, there is a systemic risk that the entire building-control-systems value chain does not have IT skill sets, which has operational risk implications.
The availability of debt and equity and risk return expectations for this capital is always front of mind for the real estate consulting firms in India. Transactions, whether debt or equity, used for acquisition or refinance and recapitalization of existing investments rely on the liquidity provided by active capital markets participants. As risk tolerance, perception of the market’s position in the cycle, and tastes and preferences for space change, so does pricing and demand. When you look at the other top issues on the minds of the real estate marketing consultants and their clients, capital markets activity and its impact on these issues becomes more evident.
Real estate development consulting firms rightly pay considerable attention to cyclical issues and short-term disruptions as critical factors affecting most business. But we should not take our eyes off some of the larger trends that slowly but powerfully change the economic landscape and the demands on property over the course of decades or even a generation.
Real estate is a business that uses debt as a tool on a regular basis. There is substantial debt for every rupee of equity in the Indian scenario of investment property. In the wake of the Global Financial Crisis, more stringent underwriting standards have caused the current lending market to pull back, but the portfolio of loans outstanding still reflects the higher leverage of earlier years. It is important to recall that the norm in real estate, well understood by real estate advisory firms in India, is that debt is neither to be abused nor to be shunned, but a financial tool that if used responsibly can enhance return for equity investors.