Property Prices and Rentals to Rapidly Rise In Bangalore, Pune, Hyderabad, Gurugram and Chennai

As the pandemic winds up around the world, many companies are transitioning back to office working. Initially it was thought that WFH was going to stay, but now even the leading companies like Tesla and Google have asked their employees to return to offices. In the backdrop of the above, the Indian tech companies are also now asking their employees to return to office. Leading the bandwagon is TCS, the largest IT company in India, which had asked all its employees to return to their offices by 15^th November 2022. When the market leader takes a stand, it is very likely that the others will follow suit quickly.

The Background

IT sector in India employs close to 4.5 million people in various IT and ITES jobs. Majority of this workforce had descended into work from home mode, and this kept on getting extended, giving a feeling that WFH was going to be a permanent feature. Many companies, including TCS had announced a transition to permanent work from home. They even launched a model called ‘TCS 25-by-25’. In this model, they had proposed that by 2025, only 25% of their almost half a million global workforce would be in the office at any time, and they too will spend only 25% of their time in the office. However, right now they want their employees to return to their workstations and the permanent work from home model seems to be differed to a future date.

The Post Pandemic Migration

As a result, close to 3 million employees are going to return to major IT cities in the next few months to come. Cities like Bangalore, Mumbai, Chennai, Pune, Gurugram, Hyderabad, Kolkata, and Ahmedabad will witness a sudden influx of people, moving back to these cities from their hometowns. Many existing employees had wound up their residential infrastructures when the pandemic struck and migrated back to their hometowns. The new joiners never created any such facilities because they were offered remote jobs during the pandemic years. Now even they will need a place to stay near the office. All of this is going to happen within the next 6 months at the most.

Impact on Real Estate

When such a large, premium workforce is going to relocate to a few major cities in such a short span of time, it is going to kickstart a huge demand for real estate in these cities. This demand is going to be driven by buyers looking to buy new homes or for rental properties. In either case, the demand for square foot space is going to increase manyfold, causing the prices to rise dramatically.

Demand Stimulators

The migration to IT Hub cities is the only factor in churning up the real estate demand and raising the prices. There are other factors as well. Let us look at them one by one.

Cash Reserves

Since the employees had been working from home for over 2 years in their hometowns, the cost of living was considerably low and they accumulated huge savings. With so much cash on hand, many will consider buying homes in the cities of their posting.

The Great Resignation

Riding on the increased demand for IT professionals, there was a lot of attrition in the IT industry in the FY 20-21 and to counter it, companies had opened their coffers and the employees switched jobs at 100 to 200 percent hikes, sometime more! Others continued in their existing companies after being retained with the offers of similar hikes. This has caused more employees to now demand real estate in these cities.

More recruitment

According to a report by NASCOM, the combined revenue projection of all the companies in IT sector in India stood at $227 billion, which was a rise of 15.5% from the previous year. This trend is going to continue in the future as well, at least for the next few years. India’s reputation as a preferred IT solutions provider, increased global demand for automation, and customer centricity of Indian IT companies are the main reasons behind such a windfall. To keep up with such a demand, IT companies went on a recruitment spree and added 4.5 lakh freshers in FY 21-22 alone. All these new employees are also going to need a place to work and stay in the cities.

Ancillary Services

As the offices get filled with employees, there is going to be a lot of demand for ancillary services such as facilities management, transportation, and catering. It is estimated that another 3-4 million employees will be needed to run the ancillary services. This will attract many more people to the cities, further fueling the demand for real estate in all forms.

Commercial Spaces

Given that the companies have gone through an unprecedented recruitment in the last couple of years, there will be an increased demand for commercial spaces. This will influence the prices even further up. This happens in two ways. One, having commercial spaces in the vicinity uplifts the general outlook of that area and secondly, the increased demand for commercial spaces stimulates economy of a city through its own upward spiral.

Further Reading – Why Are the Indian IT Companies Ending Work From Home Suddenly

Conclusion

All these factors clearly indicate that the real estate is going to see a very high demand in the months to come, stimulating an exponential rise in the real estate prices. I would not be surprised if the trend continues, and the demand surpasses even the pre-Covid levels!!