The Indian real estate sector is undergoing a significant transformation with the widespread adoption of remote work. Some companies have either started moving back to the office culture while the others have accepted hybrid and remote work environment as the new normal. In such a scenario, it is becoming evident that the changes in residential and commercial property markets are not merely transient.
Impact on the residential market
A notable impact of remote work is the shift in geographic preferences for housing. Pre-pandemic, prime real estate was concentrated in major urban centres such as Mumbai, Bengaluru, and Delhi NCR, which were preferred for their proximity to corporate hubs. However, with remote work eliminating daily commutes for many, there’s a growing exodus to suburban and even rural areas, driven by the desire for more spacious and affordable living options.
In the National Capital Region (NCR), for example, the average price for a standard 1,000 sq. ft. property within city limits is approximately Rs 88.20 lakh, compared to Rs 37.50 lakh in peripheral areas—a stark 57% cost difference. This price disparity is similarly evident in the Mumbai Metropolitan Region (MMR) and Bengaluru, with peripheral areas offering substantial cost savings of 70% and 38%, respectively.
This geographical shift is complemented by a change in housing type preferences. Today’s homebuyers are increasingly prioritizing space for home offices. This demand has prompted developers to innovate, designing residences that cater to the new work-from-home lifestyle.
Investment patterns in real estate are evolving in response to these changes. With remote work enhancing the appeal of residential properties in less densely populated areas, investors are increasingly drawn to these markets. The rent-versus-buy debate adds another layer to this trend. In major cities like NCR, MMR, and Bengaluru, the five-year rental outgo for tenants in city-limit areas constitutes a significant portion (27-52%) of the total property cost in the peripheries. Coupled with historically low home loan interest rates, currently averaging around 8-9%, the financial rationale for homeownership in peripheral areas is strengthening.
Impact on the commercial market
Despite earlier trends suggesting a decline in the need for physical office spaces, recent data indicates a robust resurgence in the commercial real estate sector with the work from office culture making a comeback.
According to JLL, cities like Chennai, Delhi NCR, Mumbai, and Pune have recorded historic highs in office leasing in Q1 2024. The four cities together accounted for a combined total gross leasing of 10.62 million sq. ft., with overall gross leasing reaching 15.16 million sq. ft. This marks the second-highest Q1 figure ever recorded and sets a promising trajectory for surpassing last year’s record of 63 million sq. ft.
The growth in office leasing is largely driven by domestic demand, contributing approximately 53% to the overall leasing activity, highlighting a strong domestic market that continues to thrive alongside global counterparts.
The ongoing evolution in housing choices will likely continue as the country further adapts to the realities of the changing consumer preferences, signalling an era of significant growth and transformation in the Indian real estate sector.
The author is the Director of Manglam Group and Founder President of CREDAI Rajasthan Women’s Wing.
