Shared economy and new asset classes gain momentum in India

V Nagarajan

The Indian real estate sector has traditionally centred around traditional office, residential and retail assets. However, globalisation, higher disposable incomes, and greater digital penetration are transforming lifestyles and have given way to a shared economy and new asset classes such as flexible workspaces and co-living, according to a joint survey by Colliers and FICCI on unveiling the potential of emerging real assets. These new asset classes represent more evolved versions of the traditional asset classes. They are gaining momentum as they offer more flexibility, convenience and sense of community living. Furthermore, as the country becomes more digitised, demand for data centres is on the rise.

The young workforce and millennial population in India currently constitute about one-third of the total population. In 2021, the average Indian is 28 years old, with more than 65% of the population below the age of 35. As this young population increasingly migrates to Tier-1 cities for jobs and higher education, changing demographics in these cities will drive demand for these alternative asset categories over the next five years.

Rising demand for the emerging asset classes is leading investors to take notice, as they explore avenues to diversify their portfolios. Data centres have received government incentives, including tax rebates and exemptions.  Colliers notes that the first half of 2021 has already recorded a 33% increase in the investment in alternative asset classes compared to the first half of previous year, led by data centres.

According to a report by CRISIL, India’s mobile and fixed-line data consumption rose sharply by 38% YOY in 2021, due in part to the pandemic. The same report expects the revenue of Indian data centre industry to rise at a 25% CAGR to INR335 billion ($4.75 billion) by 2025.

In H1 2021, Colliers noted that data centres attracted investments of INR11.7billion ($161 million), accounting for about 6% of the total private equity investments made in real estate.

According to data from Colliers total flexible workspace stock grew 2.3 times from 2017 to 2019, and the share of flexible workspace in total leasing volume rose from 6% in 2017 to 20% in 2019. In 2019, flexible workspace operators leased an all-time-high of 12 million sqft (1.1 million sqm) across India.

According to Colliers, the share of flexible workspaces in total leasing volume among India’s top six cities declined sharply to 8.6% in 2020 as operators optimised their portfolios and focused on profitability of their existing locations. This trend is expected to continue in 2021 with operators expanding at a slow pace and forecast flexible workspaces to lease around 3 million square feet (0.27 million square meters), similar to 2020.

Numbering over 400 million, millennials account for more than one-third of the total population of India, and 46% of the total workforce. Millennials increasingly prefer co-living spaces, as traditional rental models suffer from inconsistent rents, high brokerage fees, long notice periods and stringent rental agreement terms.

As of 30 June 2021, co-living space inventory in India exceeded 300,000 beds, accounting for only 1.4% of the total urban rental housing in the country. However, this sector holds huge potential for growth as rental housing receives greater focus. Colliers forecasts co-living inventory in India to rise 24% YOY to reach 400,000 beds by 2022, driven by demand from the millennial population as well as increasing migration to Tier-I cities.

I have been living in the Gulf and married to a widower.  The apartment in Mumbai is in his name who assures me that it would devolve around me after his demise.  However, he is not taking initiative for a proper documentation.  Please advice. Asha, Sharjah.    

Assuming that you and your husband are governed by the Hindu faith, the ideal way to resolve family asset is through execution of a will.  It can be executed on plain paper with two attesting witnesses.  It does not need to be compulsorily registered.  In case he is reluctant, his assets will be subject to intestacy provisions i.e. his estate would devolve around his class I legal heirs that include you and your husband’s mother.

I bought a plot from a developer who insists that there is no need for RERA formalities in his project.  What is the status of plotted development under RERA? Umesh, Dubai.

RERA applies to all projects above 500 Square meters or where more than 8 units are being constructed. It applies to all real estate projects of construction of housing, apartments, flats, villas, plots, or any other construction.