by Anushree Ghosh
Annual analysis of the commercial real estate in India
The real estate sector is one of the many pillars that define a country’s economic and infrastructural growth, as the country’s economic growth is connected with its economic evolution and development. The economic condition of a country influences the buying decision of the residents. Thus affects the buyer’s ability to invest in properties, as a result, it impacts the overall health of real estate of the country.
Assuming that the growth rate would be consistent for the coming months, we can consider that India’s GDP would grow in the coming years. With industrial manufacturing and foreign investments gaining momentum, India’s economy shows the trend of moving ahead surpassing those of many European countries. This growth directly impacts the commercial sector with the increased demand for offices. Moreover, with new reforms related to direct investment, foreign companies are investing in the commercial real estate largely
According to a recent office leasing report by Cushman & Wakefield India, the growing trend of commercial space in the market is attracting investors to make investments in this sector. We registered a growth in the number of offices that were leased in 2018 across the top 8 cities of India, in comparison to last years’ number.
We also saw a robust investment in the commercial assets, predominantly in the buildings that are about to get functional. In the second quarter, Indiabulls invested to buy 1 million sq. feet in an IT park (Hyderabad). Blackstone LP invested in One Indiabulls Park and Ascendas India Trust invested in two Navi Mumbai IT Park.
The main cities contributing to the growth of the commercial real estate were Delhi and Bangaluru. This is clearly happening due to the increase in demand of the data centres, IT companies, co-working spaces and financial service centres.
The CII-JLL report stated:
“The retail market, which has been experiencing a new lease of life with investment interest returning to the market, has also seen a growth in leasing activities from both international and domestic brands.”
We believe the demand will increase in the coming months due to the growing banking and financial sector. Grade ‘A’ buildings will remain the foremost choice of the tenants whose lease are expiring soon and they may relocate to more decentralized locations. We also see significant infrastructure development in the top cities of India. We can expect rents to rise by 4-5% over the next two years in the main cities. The one thing that could lead to miscalculation is the non-completion of the commercial projects in time, therefore the stakeholders must push the developers and government to adhere to the timelines.