India is at the crossroads of urbanisation. Improved connectivity, changing demography and better employment opportunities have made urban spaces a magnet for millions of people currently residing in rural areas. As per a UN report, more than 675 million Indians would be living in cities by the year 2035. Most Indian cities, however, do not have the adequate infrastructure to support a rapid rise in population. Innovative urban projects like mixed-use developments can be the key to solving India’s urbanisation issues.
A mixed-use property combines commercial, residential, retail and leisure areas offering buyers the entire gamut of social infrastructure in a single project. Mixed-use projects also work well for developers as they provide much-needed flexibility in planning and delivery. With the pandemic disrupting traditional models of work and leisure, mixed-use properties are likely to gain wider appeal among buyers. A lesser talked about component of mixed-use development is the presence of hotels, restaurants and bars within the mix.
Having hotels in the mix can be a win-win situation for developers, buyers and investors. Hospitality players can expect relatively better traction for their property in a mixed-use project as retail and office spaces create a readymade client base for the property. Large office spaces can lead to increased demand for MICE events, while bustling retail areas are a sought-after convenience for travellers and tourists alike. On the other hand, hotels and restaurants improve the profile of the overall project for the developers and help in the marketing of the property to interested buyers. Demand for commercial and residential feed each other creating a virtuous cycle for the entire project.
“From an investment perspective, mixed-use spaces help in risk mitigation for investors. A large mixed-use property is developed in multiple phases over several years. The cash flow from the sale of units in the initial phase can be utilised for the development of the remaining areas, which decreases the financial burden of the developer. Moreover, the proportion of commercial and residential areas can be restructured to better reflect the demand profile of the area. Land utilisation is better in mixed-use projects as the space gets efficiently distributed between different segments.”
If one considers return on investment, mixed-use projects offer greater potential for better returns. Having multiple conveniences like hotels, shops and residential units in a single location boosts the growth of the area. The appreciation in price is faster, turnovers are lower and rental yield is higher. A mix of different property segments ensures that tenant turnover is lower as commercial tenants tend to stick longer than residential tenants. The majority of mixed-use developments are present in large real estate markets like Mumbai, Delhi-NCR, Bengaluru and Hyderabad. However, with the development of public infrastructures like roads and metro railways, mixed-use projects are witnessing increased demand in smaller towns like Lucknow, Udaipur and Pune.
Increased interest in mixed-use projects outside the large markets has coincided with the emergence of Tier-2 cities as the growth drivers of the overall real estate industry. For instance, Ahmedabad’s residential real estate market at INR 83,390 surpassed large cities like Kolkata and Chennai in 2021-22, as per a report by PropEquity. This bodes well for investors seeking new opportunities outside traditional markets. As smaller markets mature, an increased number of developers as well as buyers will go after mixed-use spaces. The shift towards mixed-use properties is a global phenomenon and India is slowly catching up with it.
We have projects in Ahmedabad, Udaipur and other cities that has special focus on mixed use developments. Urban Square for instance in Udaipur will cater not just to the local city population but attract traffic from nearby towns as well.