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What does 5G, Covid and Semiconductor PLI scheme of India have to do with Real Estate?
Although seemingly unrelated, these themes have a long-term impact that unifies them – Reducing the cost of urban real estate in India. This is one prediction which may take a few years and then continue for a couple of decades so bookmark this page. Jio platforms, Airtel and Vodafone Idea are already disrupting business models with the rapid rollout of 5G in the country. It is impossible to ignore the juggernaut of tech-enabled work, whether it is teleconsultation for telemedicine platforms such as Practo, or virtual accounting models (I haven’t met my auditor in three years and yet everything gets filed accurately and on time) The data fuels this growth and continues to become richer and richer.
India has always been a fast adopter of technology as evidenced by its huge mobile penetration, Rapid Mobile Banking, UPI and many other innovations. The 5G network will provide the 100X speed and consistency for video, audio and data to stream seamlessly across the country, from far off corners of Arunachal Pradesh to Rameshwaram and from Gurez to Chilika. This is aided by a rapidly falling price of data per GB of consumption. India is the largestdata consumer in the world with 1500 Million Gigabytes per month
Semicon – With the PLI scheme from the government, Apple is already leveraging India for its China +1 model and bringing in superfast production capabilities.
Do you think these factories will be set up in metros? Absolutely not – the ecosystem will be setup on the lines of the Hosur or Sriperambudur model.. or the Hisar – Manesar model.. or Sanand .. I can go on.. the list continues. This will also lead to a continuous reduction in hardware costs; making laptops, desktops and mobile tabs more affordable for the next generation of Indians. This in turn fuels higher data consumption and the virtuous cycle continues.
Covid – This huge disruptor taught the world (SIs, Government bodies, customers and recruiters) that work is getting done remotely with little to no disruption, and sometimes even better productivity than in fully swipe-in/swipe-out modes. Of course security systems had to adapt, VPNs had to be reconfigured and a whole lot of SEZ rules had to be revamped for Covid… but the Great disruptor of the 2020 era created the required digital culture enabling remote work.
Moving on to my prediction – The real estate market in India will continue to grow – but with muted growth in Tier 1 cities and rampant growth in Tier 2 and Tier 3 cities. The combined power and confluence of the above three will drive rapid digital penetration, mobility, remote working, semi-urban working models and a techtonic shift in the way India populates its urban centers. Real Estate investors and builders should take this trend into account and recalibrate their offerings. Muted growth (3-5%) growth in price CAGR (tier 1 cities), Rapid growth (7-10% growth CAGR) (Tier 2 cities). Considering the inflation rate in India is around 6-7%, any growth below this number is a net real decline.. not growth per se… Stay tuned
This article is my personal view and not endorsed by Capgemini. I am not SEBI registered investment advisor and it is not to be taken as a recommendation to invest in any sector, make your own judgement.
