The Banking, Financial Services, and Insurance (BFSI) sector in India has been recovering strongly from the slowdown imposed due to the Covid-19 pandemic. Data released by real estate consultancy Colliers on Tuesday showed that the sector leased 6.8 million sq ft of land in 2022.
This is more than double the three mn sq ft leased by the BFSI sector in 2020 and 3.7 mn sq ft in 2021 when the country was under lockdown. 2022's leasing was even higher than the 6.5 mn sq ft leased in 2019.
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In the first half of 2023, according to Colliers' data, the BFSI sector leasing stood at 3.6 mn sq ft. The data reflects the trends in six cities, including Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune.
"This strong streak continued in the first half of 2023 with BFSI occupiers' leasing at 3.6 mn sq feet, rising 14 per cent annually, demonstrating a healthy outlook for the sector in 2023," said Peush Jain, managing director of office services, Colliers India.
The sector has seen a steady rise in demand in the last two years, with its share in total leasing reaching 15 per cent in the first half of 2023, up from 10 per cent in 2020 and 11 per cent in 2021.
The rise in leasing has been attributed to the return to office and improved domestic financial sector outlook.
"Domestic banks, insurance companies and financial institutions have witnessed an uptick in demand backed by improved economic outlook and heightened domestic demand," Colliers said.
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The data also showed that a majority of the large BFSI companies continue to prefer conventional office and work spaces, keeping the demand for real estate space buoyant.
"Offices provide an absolute opportunity to ensure customer experience along with employee satisfaction and productivity, collectively contributing to overall business performance while also addressing climate action goals," Colliers added.
However, hybrid and work-from-home have increased the demand for flexible space.
"While hybrid working prevails across most sectors, BFSI occupiers in India continue to focus on bringing employees back to the office, with over 90 per cent rate of return to the office. The preference towards traditional office spaces remains unabated, as they continue to prioritise data security and operational privacy over flexibility and lower capex," said Vimal Nadar, senior director and head of research at Colliers India.
"Going forward, the sector will continue to contribute upwards to conventional office space uptake in India, seeking new age Grade A office spaces, with increased customisation addressing their data security, EHS compliances and other technical office space requirements."
In India, Mumbai dominates BFSI leasing during 2022 and the first half of 2023 with a market share of 31 per cent. Bengaluru and Delhi-NCR follow by 24 per cent and 18 per cent share in total leasing.
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Interestingly in the first half of 2023, Bengaluru surpassed Mumbai in total BFSI leasing, accounting for 34 per cent of the total leasing in the sector.
"As digitisation remains core to financial services, BFSI players will continue to explore larger markets with the presence of tech-hubs such as Bengaluru, Delhi-NCR, Hyderabad, Chennai, Pune," according to Colliers.
"Tier 2 markets are also likely to witness heightened demand as occupiers look to set & expand their back-office operations in these locations owing to improving infrastructure, availability of digital talent pool and favourable real estate costs."