Demand has been picking up steadily across a range of asset classes in Eastern India.

Veera Babu, Managing Director, Hyderabad & East India, Cushman & Wakefield

India's real estate market has seen a revival last year. How was the real estate market in the eastern part of the country?

Eastern India's real estate market has witnessed a robust growth last year. Office demand has improved by more than 50% in Kolkata and Bhubaneswar has also witnessed growing interest from local/multinational occupiers who were looking to setup/expand delivery centres. Big campus developments by IT/FMCG giants such as ITC, Wipro, TCS, Infosys and LTI Mindtree has also uplifted the sentiments. Residential launches and sales have also recorded a sharp jump driven by a robust post pandemic recovery. The city has also seen a spike in Grade A warehousing demand from leading e-commerce, 3PL, manufacturing, FMCG, retail players who were looking to cater to other cities in East and North-East India. Developers are exploring certain tier II cities such as Bhubaneswar, Siliguri and Guwahati for new warehousing projects to address the demand. Data centers segment has also gained considerable traction driven by policy incentives, strong growth in data consumption and planned/upcoming cable landing stations, and has attracted major players such as Reliance Jio, Adani, and NTT in the recent past. Retail has also rebounded with both malls and prominent main streets recording footfalls well above pre-Covid levels. Overall retail recovery has been robust, and rentals have shown steady growth, especially at main streets, over the past 3-4 quarters. Phoenix Mills and Merlin Group are developing malls in Kolkata, which will address high demand for quality mall space going forward. Meanwhile, proactive measures and promotions by the Odisha government have also helped multinational companies such as IBM, Deloitte, PwC and EY to explore Bhubaneswar in their tier-2 city strategy.

How is the demand picking up for residential, commercial, affordable and luxury real estate projects in Kolkata and other eastern markets?

Demand has been picking up steadily across a range of asset classes in Eastern India, especially in Kolkata. Office leasing volumes recorded a post-Covid high in 2022 and net absorption has increased by more than 80% y-o-y in 2022. Office demand in Q1 2023 has already reached 40% of the total volume witnessed last year. Major domestic and global firms such as Deloitte, KPMG, Grant Thornton, Infosys and LTI Mindtree have leased space in the city recently. Bhubaneswar has also attracted multinationals such as IBM and Deloitte who have set up delivery centres.

Affordability, policy incentives (circle rate and stamp duty cuts) and launch of new projects at various price points have driven residential demand in Kolkata. Certain reputed developers have been providing additional facilities such as extra study room to drive demand and have also kept prices largely competitive. In recent quarters, residential land transactions have picked up including participation and acquisition by branded developers such as Phoenix Mills and Ambuja Neotia in land auctions held by HIDCO.

Affordable segment accounts for a healthy chunk of housing sales and launches in Kolkata as well as smaller cities such as Bhubaneswar. Peripheral micro markets in Kolkata continue to attract affordable project with certain new developments witnessing strong demand. For instance, Howrah, Barasat, Sonarpur have emerged as affordable housing destinations on the back of land availability, ample scope for amenities and good connectivity. After a prolonged period of negligible activity, high-end and luxury projects have made a comeback last year. Locations such as EM Bypass, Elgin Road (CBD) have witnessed new luxury apartment project launches while Joka has seen high-end bungalows, villa projects by reputed developers. Affordable housing projects in Bhubaneswar have been exempted from registration fees thereby providing support to the segment and driving new developments.

How far the infrastructure developments influencing the real estate market growth in the eastern region?

The under-construction Kolkata East-West Metro will improve connectivity of prominent Kolkata office corridors such as Salt Lake Sector-V and Rajarhat significantly and boost the office market dynamics. East-West metro has already started operations from Sector V and is now getting connected to New Town. The government is promoting New Town as a smart city and has come up with initiatives such as dedicated cycling tracks, e-buses, cycle docking stations, green verges, EV charging stations, and proposed an intra-Newtown monorail. The recently opened 650 mts long flyover from Sector V to New Town has already become a crucial alternative route for commuters.

The eastern region's industrial and logistics sector is expected to benefit from the Eastern Dedicated Freight Corridor (EDFC) which connects Dankuni in West Bengal with Ludhiana in Punjab and passes through Haryana, Uttar Pradesh, Bihar, and Jharkhand. New industrial corridors are also being planned by the West Bengal government such as the Dankuni-Kalyani, Dankuni-Jhargram corridors. These are likely to benefit the industrial, logistics and warehousing segments significantly upon completion.

The under construction Trilateral highway connecting Kolkata-Siliguri-Guwahati-Kohima-Yangon-Bangkok of 2,800 km would boost commercial activities not only in West Bengal but also the entire east and far east locations of the country. Both the state and central governments are actively taking steps to connect far-eastern states with country's mainland.

The Central Government has approved road projects worth around Rs 6,000 crores to Bhubaneswar. These include a ring road, vehicle underpasses and flyovers which will improve connectivity within the city significantly and boost commercial and residential real estate.

What are the major challenges faced by the developers and builders specific to eastern region? What is the way forward?

Land acquisition was a challenge, but the state government has sought to address it by creating land banks and providing it in designated industrial parks. The government is looking to create a financial district in New Town and attract large national and international financial institutions. Bengal Silicon Valley is an initiative to attract high-tech companies, including data centers. The recent amendment in land allotment policy and provision for freehold land is a good initiative that is likely to attract more companies to Kolkata. This will provide companies the flexibility in land usage for an unlimited duration unlike the leasehold system which provides land on a 99-year lease.

Higher office vacancies is another concern. Best-in-class properties in Salt Lake, Sector V and Rajarhat have relatively lower vacancies but older buildings across the city have higher vacant space. There is a significant opportunity to repurpose some of these buildings which will reduce vacancy levels and can boost market sentiments.

How do you look at the overall market opportunities in the region? What could be the trends to look for in future?

The region's robust talent pool provides both domestic companies and multinationals the incentive to set up their delivery centres and leverage the expertise. Prominent IT and consulting firms such as Infosys, Deloitte, KPMG, Grant Thornton, and EY have established their offices over the past year and are looking to expand their footprint. Flex spaces have been a major contributor to the Kolkata's office absorption in the last two years with clients such as Worley, Samsung, Vialto Partners, EY and KPMG etc. opting for enterprise solutions.

The region does not have a major presence of multinational BFSI firms such as Goldman Sachs, Barclays, American Express, Wells Fargo etc. and attracting some of these global giants could boost Kolkata/Eastern region's office market immensely.

Warehousing and data centers are other important sectors with immense opportunity. Both these asset classes can provide stable returns over the long term. Prominent developers and data center operators have been acquiring land parcels in peripheral micro markets and charting out investment plans.

Construction has already commenced on some greenfield data centers. The same holds true for the residential market, where launches and sales have surged in recent quarters. Demand for bungalows, villas, row houses and high-end apartments is also growing steadily.

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