Two Parts of the Spectrum

The wheel of reforms and initiatives, on the other hand, kept turning – arguably at a pace which was better than any recent year. Therein lies the first set of contrasts for India. The year began with the much-awaited scaling-back of benchmark lending rates by the MPC, while the AIF of INR 25,000 crores came towards its close. In the intervening period, were two budgets, radical changes to GST rates on housing, a welcome reduction in corporate tax rates and various budgetary incentives. The policy-machinery remained in action most of the year, despite the steady slide of economic indicators.

The contrasts were evident in more ways though. We take two other examples to make it interesting.

The second prominent area of contrast was the aspect of an ever-increasing office space activity, juxtaposed with that in residential segment. When 2018 ended, office markets had recorded the highest ever single-year office-leasing till then. 2019 surpassed that with a comfortably large margin of 22% growth. Between the top 6 cities of India, the aggregate leasing was over 57.7 million sq.ft.. However, this stood in a disconcerting contrast with the activity in residential sector, which continued on the alarming path of slow-movement throughout the year. Among other things, it kept raising concerns about the short-term efficacy of various efforts being undertaken by the policy-framework. It is however, acknowledged that the malaise afflicting residential markets is due to more than just a handful of reasons. While we will discuss them in a fresh piece, the contours of trouble in that segment were built over a long period, where the NBFC crisis of 2018 acted as the proverbial last straw. The point of contradiction between the office and residential, nevertheless, remains as unambiguous as can be. 

A third area that interestingly often escapes attention, is that of the patterns of cities’ performances. The case in point is Hyderabad. It may not present itself as a contrasting proposition in a comparable timeframe, but it is something that has contradicted its own conventional path. Hyderabad has clearly supplanted the front-runners of the past decade as the third major force in the country. With a near seven-digit absorption (approximately 9.5 million sq.ft.) in 2019, the city has overshadowed the likes of Mumbai, Chennai and Pune by a significant margin. The contrast is remarkable when viewed from a historical perspective. Less than two decades ago, it was mostly dependent on office-demand that ‘spilled-over’ from the big-two of south, namely Bangalore and Chennai. The latter had taken the lead in creating the landmark TIDEL Park, which was preferred over anything that Hyderabad would offer at the time. From belonging in the unflattering fringe of tier-II cities in 2000s (the term that came to differentiate cities of high vs. medium economic activity) to becoming the third largest in terms of activity, pushing Mumbai to the fourth place, is a commendable rise. Will the experts unequivocally call it tier-I henceforth? The contradiction in analysts’ minds, perhaps, still require being sorted!

The year that just ended, closed the second decade of the third millennium. The first decade had risen from the ashes of major devastations – those of dotcom burst, global political strife after 9/11, and the technological conundrum of Y2K puzzle in the world of computing. In no time, it pushed most of that into oblivion, to record soaring commercial activity in real estate. The end of the first decade, too, was amidst perplexing circumstances emanating from Global Financial Crisis (GFC). Back home, in India, the beginning of each decade was marked by strange contradictions, which were steamrolled by power-charged activity in real estate. Will the third decade repeat the patterns of its two previous predecessors? It is time to wait and hope.