Matching shopping options with local purchasing power
Whenever I’m asked how real estate is performing in India, I have to ask the questioner to be a bit more specific. Real estate is not a single industry but consists of various categories/asset classes, and each behaves differently at the same time and at different times. Residential, commercial and retail real estate each serve a very separate and distinct purpose, respond to a different type of demand and attract different types of investors.
However, it is equally true that all three categories are inter-related because they all depend on each other to drive growth. Residential projects tend to crop up around commercial office catchments, because that is where jobs are created, and employment drives the financial ability and appetite for homeownership. Likewise, retail real estate developments are only feasible in and around residential and commercial catchments, since retail needs customers. What differs in these three asset classes are the ticket sizes, investment rationale, and investment horizon. To invest in either residential, retail or commercial office real estate calls for different degrees of financial capacity, risk appetite, patience and understanding of what drives growth in each of these asset classes.
Among the various interplays between these real estate categories, the relationship between residential and retail is particularly interesting. In any given location, a certain type of retail follows (or sometimes even spawns) a corresponding type of housing. An area which primarily houses middle-class families will attract a lot of unorganized or mom n’ pop retail outlets, hypermarkets which enable value shopping for daily needs, and malls with a lot of mainstream brands. Likewise, luxury housing destinations are most logically juxtaposed with high-end retail. At the same time, India’s urban real estate landscape cannot really be clearly defined in terms of mid-income and luxury housing, as a significant number of residential areas in our cities are home to both middle-class and HNI residents.
This fact has allowed for a very generous bandwidth of retail to become feasible in and around major residential catchments across the country. However, luxury still very much begets luxury, as well. Let us examine some of the notable instances:
While it is always tempting to claim that real estate development in India evidences no clear planning, the logical manner in which residential and retail spaces follow each other seems to tell a different story. Granted, there is in most cases no pre-determined town planning involved – but the fact remains that Indians can nevertheless match their shopping preferences with their inherent purchasing power. Like water, lifestyle appears to always find its own level in India.
Authored By: Anuj Puri, Chairman – ANAROCK Property Consultants
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