Commercial real estate up, residential down across major Indian cities, says report
Aug 26, 2015
Source : Toi
MUMBAI: Average transacted office lease sizes across Mumbai, Bangalore, Chennai and Pune have increased from the uncertain times seen in 1Q14 - prior to the general elections, global property consultant JLL India said on Tuesday.

"Market morale was low in 1Q14, which could explain the lower sizes. Following elections in May 2014, however, market sentiment improved gradually, while Mumbai, for example, witnessed 65% appreciation in average deal sizes between 2Q14 and 2Q15," it said.

The number of transactions also increased considerably across all these cities. Pune leads with 89% y-o-y growth in transacted space per lease deal, followed by Bangalore at 78% and Chennai at 67%. "Occupiers are not only leasing larger office space, but they also expect all the space to be on the same floor. Developers are constructing bigger floor plates to meet the evolving demand," it said.

But residential sector tells a different story. In the same set of cities, residential developers are under pressure owing to sluggish sales and cash flow issues.

"In the past year, apart from marketing tactics such as flexible payment schemes and on-the-spot discounts, average apartment sizes have been falling across all major cities of India. Mumbai and the Mumbai Metropolitan Region witnessed the largest fall in average apartment sizes on an annualised basis at 5%, followed by Bangalore (4%), Chennai (4%) and Pune (1%)," said Ashutosh Limaye, National Director - Research, JLL India

Mumbai's fall in apartment sizes from 2010 to date has been 26.4%. There has been a corresponding reduction in the carpet area. For the same period, Bangalore registered a 23.7% reduction in average apartment sizes, followed by Chennai at 22.2% and Pune at 7%.

"Developers can generally change apartment sizes prior to completing the foundation on the ground without hassles from the plan-sanctioning city agencies. A price correction, on the other hand, is very market-driven. This is a good move by developers, as they have been able to reduce prices and keep the configuration unchanged, despite rising construction costs, approval and finance costs eating into their profits, by reducing unit sizes," said Limaye.



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