Commercial realty demand dips 30%, rentals down 15%
Aug 27, 2012
Source : Business Standard


The demand for commercial real estate has dropped around 30 per cent in the past year, prompted by the economic slowdown, according to industry analysts. This, in turn, has resulted in at least a 15 per cent decline in rentals across many locations. In some areas, office rentals have come down by as much as 50 per cent.
In fact, credit to the commercial real estate (CRE) sector grew by just four per cent during June, down from 23.2 per cent in June 2011, suggesting a subdued activity in the office space or retail segment.
In the first quarter of 2012-13, industrial production contracted 0.1 per cent, while exports and imports contracted 1.7 per cent and 6.1 per cent, respectively. The slowdown in economic activity has affected the number of office space deals, as companies are cutting on real estate costs and moving from prime locations to suburbs in many cases. Some are even taking up smaller offices.
A report by brokerage firm Kim Eng Securities suggested that across major cities, demand for office units is at a five-year low and office rentals are down by up to 50 per cent in some locations. The focus of real estate firms has also shifted from commercial to residential.
For instance, Amit Sarin, chief executive officer of Anant Raj Industries, which is mainly focussed on commercial earlier, said: “In the past two years, we have changed our strategy and will focus on residential for some time.”
Even DLF Ltd, the country’s largest real estate developer, has said its focus is only on high-end residential projects and plots as it did not make sense to do commercial in times of an economic slowdown.
Ravi Ahuja, executive director at commercial real estate broker Cushman and Wakefield, told Business Standard the Maharashtra government’s recent amendments of 100 per cent premium for additional FSI (floor-space index) in commercial was a big deterrent for developers. “This will increase the cost for developers, discouraging builders to do commercial, which may impact supply further in the market,” Ahuja added.
According to a Cushman and Wakefield report, Mumbai’s prime office space rentals declined nearly 8.3 per cent in April-June, compared with last year and remained constant compared to the previous quarter.
In the national capital region (NCR), the pace of real estate developments continued to remain slow during the second quarter of the current year. The total supply of 725,000 sq ft of Grade A space during the quarter was the lowest in the last five quarters, registering a decline of nearly 64 per cent over the previous quarter and 45 per cent over the corresponding period last year, said Cushman and Wakefield data.
“Demand across NCR has declined by about 30-40 per cent,” said Anil Kumar Sharma, chairman and managing director of Amrapali Group, a real estate company.
Ahuja of Cushman added this year, they were expecting an absorption of 33-34 million sq ft of office space, nearly no growth from the 35 million sq ft in 2011. “The peak of 2007 saw office space take up 42-45 million sq ft,” he said.
In Bangalore, occupiers have begun to defer their space requirements, thus resulting in lower absorption levels, the data said.
Amrapali’s Sharma said on Sunday, instead of commercial, it was prudent for a developer to go for hybrid or mixed used development. However, Sarin added commercial would bounce back after one-two years.
The retail space story is worse. Due to a subdued demand for retail space, developers went slow on several under-construction projects, and led to a restrained supply in Mumbai, NCR and Bangalore. Delhi-NCR and Mumbai registered double-digit vacancy levels at approximately 13 per cent and 10 per cent, respectively, in the April-June quarter, according to a DTZ report.

Latest Realty News

'Odisha top destination for FDI in India'
Aug 27, 2012
Bhubaneswar: Mineral rich Odisha has emerged as the most favoured destination for overseas investors with investment proposals worth Rs 49,527 crore followed by Andhra Pradesh and Gujarat during 2011-12, according to apex industry body ASSOCHAM. Though barely 17 FDI proposals were filed in Odisha, the state garnered lion's share worth about Rs 49,527 crore in the total FDI proposed across Ind
Houses for poor: Dikshit eyes USAID
Aug 27, 2012
New Delhi: Delhi Chief Minister Sheila Dikshit today sought assistance from the United States Agency for International Development (USAID) for an ambitious project to build houses for economically weaker sections of people in the capital. Dikshit made the request to USAID authorities in the presence of US Ambassador to India Nancy J Powell at a function to release a report on 'Making Health S
Govt firm on VAT recovery from builders in Maharashtra
Aug 27, 2012
The Maharashtra government has launched an aggressive drive to recover value-added tax (VAT) from builders and developers on the sale of under-construction flats during June 2006 and March 2010. The government has mopped up Rs 600 crore from the realty players since 2006, and hopes to recover another Rs 1,000 crore. The government has ruled out any relief for the developers, making it clear
Govt to simplify construction work process, assures CM
Aug 26, 2012
Mangalore, Aug 25, 2012, DHNS State will introduce Infrastructure Bill, says Shetter at Statecon meet Chief Minister Jagadish Shettar said that the State government will make an effort to simplify the process related to obtaining permission to real estate developers, to take up construction work. Speaking after inaugurating ‘Statecon 2012’ organised by Confederation of Real Estate and Dev
Housing finance firms permitted to raise funds through ECBs
Aug 24, 2012
Liberalising overseas borrowing norms, the government today allowed housing financing companies to raise funds through external commercial borrowings (ECBs) route to finance low-cost housing projects. The High Level Committee on External Commercial Borrowings which met here, also permitted FIIs to invest up to USD five billion in rupee bonds within the overall corporate bond limit of USD 45
Special squad to probe land frauds on capital outskirts
Aug 24, 2012
Bhubaneswar: The State Government on Thursday constituted a three-member special squad to probe fraudulent recording of Government land in favour of private individuals in 10 mouzas on the outskirts of the Capital. With the incidence of fraud recurring, the Government suspects role of its own officials in the land scams. The special squad, which will include assistant settlement officers Prad
Former sub-collector, tehsildar in the loop
Aug 24, 2012
Balasore:The State Government is contemplating action against three erring revenue officials, including the former sub-collector of Balasore and tehsildar of Bhogarai, for their alleged involvement in a land scam. The officials had allegedly favoured a private company by leasing out a patch of government land for a hotel near Talasari beach. A probe was ordered following media reports rec
Lighting of 4 city areas to mark local self-government day
Aug 24, 2012
Chief Minister Naveen Patnaik will kick start the Local Self-Government (LSG) day celebrations by inaugurating street lighting at four locations across the city. The street lighting is one of a series of projects lined up by BMC for inauguration, in the run up to the main event on August 31. The new streetlights have been provided at Khandagiri Square to Baramunda, Khandagiri Square to Kalinga
Builders' body asks FM to bring in sops for real estate
Aug 23, 2012
MUMBAI: After finance minister P Chidambaram asked realtors to sell off unsold flats at discounted prices, CREDAI, the apex body of real estate developers in the country, put the ball in the minister's court and said he should take immediate steps to boost housing stock supply through special incentives to the affordable segment. Chidambaram had reportedly asked commercial banks to put pressur
New garden blooms on Bhubaneshwar tourism map
Aug 23, 2012
BHUBANESWAR: The temple city added a new and unique spot in its tourist map, which is not only a visual beauty but also provides olfactory pleasure. Chief minister Naveen Patnaik on Wednesday inaugurated a fragrant flower garden on the premises of Regional Plant Resource Centre (RPRC) botanic garden in a landscape format here. The garden spread across in 3.5 acres of area has more than 70 varieti

Latest Realty News Of State

Realty Talk's