Demand for commercial properties likely to rise in Kerala, says CRISIL Survey

Kochi: If the takeaways from the Real Estate Conclave recently held in Kochi by leading global analytics company CRISIL are any indication, real estate developers are broadly optimistic of continued growth in southern markets, particularly Kerala.

The deliberations at the conclave underlined many of the findings of a sentiment survey conducted in the lead-up to the event. Around two-thirds of the respondents in the survey are optimistic about the market in Kerala, which constitutes 3 per cent of the total project registrations in southern states. Around half expect growth in Kerala to touch double digits in years to come. Close to 75 per cent of respondents envision a moderate expansion in demand for commercial properties in the Kerala real estate market in the next 2-3 years due to an anticipated increase in economic activities and infrastructure development.

RERA statistics indicate that of the 1.35 lakh project registrations in India, southern states — Tamil Nadu, Andhra Pradesh, Kerala, Karnataka and Telangana — collectively hold 34 per cent share. Maharashtra leads with 35 per cent, followed by Tamil Nadu (16 per cent) and Gujarat (11 per cent). 

“The sentiments are driven by an optimistic outlook among homebuyers, supported by a steady stream of quality projects from trusted developers. Most developers anticipate continued growth in the southern region's residential and commercial real estate segments. Additionally, Tier 2 and 3 cities in these states, particularly Kerala, are poised for growth, fuelled by rapid urbanisation and affordability," Ashish Vora, president and business head, CRISIL Market Intelligence and Analytics, said.

As per the survey, 60 per cent of the developers see appetite for sustainable and green building properties growing, moving the industry towards a more environment-conscious approach. An overwhelming 80% of the developers plan to have sustainability as a cornerstone of their future luxury projects, paving the way for a greener future. 

Senior citizen living communities and built-to-rent (rental housing) are two models gaining traction. 

One in two developers (50 per cent) believes there has been a 25 per cent decline in non-resident Indian (NRI) customers for the past three years. The mix in Kerala has changed over the years to 40 per cent NRI and 60 per cent domestic from 65 per cent NRI and 35 per cent domestic, with second-generation NRIs increasingly opting for destinations other than Kerala because of better social infrastructure and growth opportunities there. The decline has prompted developers to shift focus to domestic customers.

However, only 21 per cent of developers are looking beyond Kerala for their projects given the growth prospects. Around 60 per cent believe Thrissur has substantial growth potential, as do Palakkad and Kollam. While Kochi and Thiruvananthapuram are experiencing steady growth, several of the micro markets have potential — Edappally, Pallikkara, Kalamassery, Vazhakkala and Vyttila in Kochi, Kowdiar and Kazhakoottam in Thiruvananthapuram, and Kuriachira and Punkunnam in Thrissur, to name some.

According to CRISIL, the real estate industry needs to shift its stance on several counts to overcome current challenges.

“Developers can drive growth by prioritising local market needs. Increasing the supply of affordable housing will help meet demand from local customers. Focusing on sustainable and eco-friendly housing solutions will attract environment-conscious buyers. Leveraging digital advancements will help improve efficiency, transparency, and customer experience. Exploring new models such as retirement and senior living communities will add revenue lines. Further, fostering partnerships and collaborations with international developers, investors and experts will bring in ideas, expertise and best practices," Binaifer Jehani, business head - Assessments, CRISIL Market Intelligence and Analytics, said.