Investors turn pessimistic on commercial real estate
More number of investors and tenants felt rentals in the segment are expensive compared to earlier quarter; many felt leasing rates had moved into stabilization phase
Nov 04, 2015
Source : DNA


Monthly rentals and capital value expectations in commercial real estate  in India rose in September quarter, albeit, at a pace lower than expected before, according to the Royal Institute of Chartered Surveyors (RICS), the UK-based qualifications and standards body for land, property  and construction.

The Indian commercial property monitor also indicated that more number of respondents – investors and tenants – in the previous quarter felt that market valuation of the commercial properties were expensive compared to the quarter before.

In contrast, the percentage of those who had previously felt that office spaces were fairly priced dipped in the third quarter ended September 30 compared with the earlier quarter.

In terms of the property price cycle of the commercial segment in the real estate sector, a large percentage – 38.3% – feel that it was in stabilization phase. The percentage, which believed it was in an early uptrend, was also high at 27.2%. An almost equal percentage of 24.7% felt the commercial property segment was in mid-downturn. Only 6.2% felt it was in mid-upturn and a small 1.2% felt it had peaked.

Devina Ghildial, managing director, South Asia, RICS, said the Indian commercial property market was on the upswing as demand was outstripping supply but growth in rentals was modest compared with earlier expectations.

"There is a dearth of available supply of grade A office or commercial spaces across major cities in India. Many new MNCs are looking to come into the country while existing large corporate are also ramping up their operations at a solid pace, but supply of grade A office space is not able to match up to this demand, leading to healthy appreciation," she said.

According to the report, there was a spurt in the demand for commercial property in the sector as auto, banking financial services and insurance (BFSI), telecom, fast moving consumer goods (FMCG), consumer durables, IT and e-commerce start-ups in the national capital region (NCR), Bangalore and Mumbai, which remained upbeat with closures of several large-sized transactions during the quarter.

Ashutosh Limaye, head – research & real estate intelligence service, JLL India, said commercial properties in India were most affordable when compared to other global markets with rentals having bottomed out and making its way up.

He said the rise in rental was "gentle" but the direction was definitely up.

"The rentals in the commercial segment of real estate is currently fair and competitive as it is still below the previous peak (in 2008)," said Limaye.

According to him, Bangalore was the only market that had reached its peak of 2008 while most others remained more than 10% below it.

Limaye said Chennai was 2% below its peak, Pune 10% while the rest were over 10% lower than their peak.

He said Mumbai and Delhi had reached a high of Rs400 per square feet (sq ft) per month in 2008.

"Today, Nariman Point is 30% below that (2008 commercial property rentals) while suburbs like Andheri, Kurla and others were 20% lower," he said.

J C Sharma, managing director of Sobha Developers, said India offered arbitrage in two things – wages and salaries and office rentals. He said MNCs came to India because of these two arbitrages available to them to be competitive in the global market.

"If you, exclude markets like Mumbai, Bandra Kurla Complex (BKC) and Delhi, 90-95% of the transactions in the Indian commercial property sector were less than $1 per sq ft, which is very cheap compared to markets in other emerging markets and some of the Southeast Asian countries like Malaysia, Bangkok, Jakarta, etc," he said.

Sharma said high absorption rate in the commercial sector over the past few quarters in markets like Chennai, Kochi and others had resulted in better realisation in rentals.

Latest Realty News

Nov 04, 2015
Lucknow: In a major judgement, Allahabad High Court has ruled that a child born out of rape has inheritance rights over the property of the assaulter, the "biological father"
Nov 04, 2015
Mumbai: Innovative discounts will not be of much help in boosting house sales in Mumbai because prices are way beyond the reach of most buyers, feels brokerage house JM Financial.
Nov 04, 2015
NEW DELHI: India's largest realty firm DLF's net debt has increased by Rs 922 crore during the quarter ended September to Rs 22,520 crore.
Nov 04, 2015
NEW DELHI: The Supreme Court today allowed three DLF subsidiaries to sell shares worth Rs 12,000 crore to reduce debt, declining the regulator's plea to prevent the real estate group's move. The DLF stock was up 3.9 per cent at 11:24 am on the Bombay Stock Exchange.
Nov 03, 2015
Mumbai : Dubai Property Show is going be held at Bombay Exhibition Centre, Goregaon East, Mumbai, from 6th-8th November this year, where over 35 UAE developers shall showcase budget homes to luxury apartments, beach properties, villas, furnished apartments and commercial properties at the event.
Nov 03, 2015
LUCKNOW: The Lucknow Municipal Corporation (LMC) would realize its long-held dream of venturing into real estate post Diwali. The corporation has finalised tenders for building a huge commercial complex in Kamta, near the new high court building, and three residential projects - one behind Omaxe City on Rae Bareli Road and two others in Para. All these ventures are set to begin this month.
Nov 02, 2015
Delhi: In a ruling that will restrict the right of women seeking equal share in ancestral property, the Supreme Court has said that the 2005 amendment in Hindu law will not give property rights to a daughter if the father died before the amendment came into force.
Nov 01, 2015
Mumbai: State Bank of India (SBI) chairperson Arundhati Bhattacharya on Saturday called for ending the "regulatory arbitrage" enjoyed by pure-play home financiers, which can lend below their prime lending rates whereas banks cannot.
Oct 31, 2015
Mumbai: Finance Minister Arun Jaitley said on Saturday he hoped interest rates and inflation would remain low to help revive the economy.
Oct 31, 2015
Mumbai: Hopeful that the age of slowdown will end soon for the real estate industry, Finance Minister Arun Jaitley on Saturday said the sector must survive on market economy and subsidies should not be the "essence of survival".

Latest Realty News Of State

Realty Talk's