INDIA Trends and Developments Contributed by: Vivek Chandy, Archana Tewary, Brijita Prakash and Karthik BM, JSA
age global data centres and capability centres (GCCs) to set up operations within such states. These policies adopt a multi-pronged approach to attract the setting up of GCCs, by focusing on development of infrastructure, residential and commercial real estate, and transportation as well as investing in skill development and aug - mentation of research capabilities. During 2024, GCCs accounted for a 37% share in the overall office leasing in India. This is a welcome devel - opment, as the establishment of GCCs not only increases real estate transactions (commercial and residential) but also benefits local econo - mies in multiple ways. Other industries having a multiplier effect on commercial real estate. In some markets, the healthcare sector has also been a key driver for real estate development, and as the healthcare sector sees increasing investments from private equity investors, the same will have a multiplier effect on real estate development as well. An interesting trend seems to be a decline in leas - ing of spaces by (non-GCC) IT/ITeS companies in Tier I cities, mirrored by an increase in flex space operators or co-working spaces in 2024. As noted above, however, the biggest driver has been the development of GCCs. Developers of flexible real estate spaces and co-working spac - es anticipate that the total flexible workspace stock will nearly double by the end of the cal - endar year 2027. Flexible working spaces also provide additional amenities and services that would be attractive to start-ups. Tier II and Tier III cities, the next frontiers of development. Immediately prior to the pan - demic, the real estate sector in India saw sev - eral blockbuster platform deals, in which large developers across the country sold fully devel - oped commercial and retail projects to buyers (often backed by large private equity funds and
sovereign funds) or put the assets into listed real estate investment trusts. In the immediate after - math of that phase, the developers seem to have reinvested the proceeds from such sales into projects in Tier II and Tier III cities, a welcome move for the real estate industry overall. This trend recognised the saturation of real estate projects in some markets such as Mumbai and highlighted the potential for cities such as Pune, Mysore and Visakhapatnam, among others, to be developed into hubs for industries. Tier II and III cities now reportedly account for nearly half of all land acquisitions by developers by area, demonstrating a clear trend for upcoming real estate projects. In these cities, as a natu - ral corollary, the value of residential real estate has also appreciated, reinforcing the market strength and potential of these cities. Housing demand in India is expected to touch 93 million units by 2036, driven by multiple factors such as a projected shift of a significant percentage of population to urban areas, development of metro and rail networks in multiple smaller cities, and improvement in network and connectivity. Some companies have also publicly announced a stated intention to remain based out of smaller cities to lower the costs of operations, as well as perhaps provide a better quality of life for their employees. However, the fact remains that for tech-driven companies the critical talent pool may still be based out of the major cities, neces - sitating setting up operations in these large cit - ies. We are also witnessing investments, by both domestic and international developers, in devel - oping warehousing and logistics parks in Tier II and Tier III cities, particularly those that border Tier I cities. This is mainly because warehousing and logistics parks require larger tracts of land at relatively cheaper prices when compared to IT/ITeS companies. The National Logistics Policy
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