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The Economic Times

Office realty in demand, but home sales fall

BENGALURU: India’s office real estate market stayed positive while residential sales across the country fell sharply since early this year.

Higher corporate demand and reduced Grade-A supplies have pushed upwards the rental of commercial properties across the country.

“Of the 36 commercial micro markets in the country, 10 have seen rise in rent by over 25% in the past one year. Certain micro markets in Hyderabad have even seen increase in rent by up to 40%. The recent regulatory changes make India more attractive for foreign investors and developers and will offer a level playing field,” said Sanjay Dutt, CEO for India Operations, Ascendas-Singbridge.

Some of the markets where rentals have moved up include Cyber City and Golf Road Extension in Gurgaon, Outer Ring Road and Whitefield in Bengaluru, Taramani in Chennai, Goregaon and Lower Parel in Mumbai, Kharadi in Pune and Hi-Tech City in Hyderabad.

“Vacancies remain north of 20%, but occupancy problems tend to affect only less desirable buildings, good-quality assets continuing to see strong demand and rental growth,” said Abhishek Goenka, Partner & Leader – Real Estate, PwC India.

This is in contrast to residential real estate where demand has fallen due to demonetisation across major cities in the country, with most deals being put on hold. Brokerage firms across the country have seen enquiries of residential transactions drop by as much as 40% in the last one week, while builders have seen closing of new property transactions crash by at least 60% in the last one month alone.

But not all agree.

“We don’t see any blip in demand for commercial real estate. Clients continue to look at their business plans and expand with good commercial spaces seeing reasonable demand,” said Vinod Rohira, Managing Director and CEO – Commercial Real Estate & REIT, K Raheja Corp. Growth and consolidation, in the IT and ITeS sectors, continue to drive demand for large office spaces, with almost 70% of space absorption or supply coming from this sector, the rest from the CBD, suburban CBD, demand from financial services, banking, pharma, insurance, etc.

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