Some six months after they fled the real estate sector, investors are gradually making their way back. This time around, high networth individuals (HNIs) and domestic funds are putting money mainly into office and retail spaces.
As the economic meltdown unfolded in late 2008, commercial realty became the worst hit segment in the sector and lease rental and property rates fell by 30-40% in the metros and the bigger cities. The lower prices, in turn, have triggered some big ticket sales in recent months.
Big catch: The DLF tower in Gurgaon. The cash-strapped realty firm sold its 66% stake in a private mill property in central Mumbai to an undisclosed Chennai-based investor for Rs310 crore in May. Ramesh Pathania / Mint
In May, Unitech Ltd, India’s second biggest listed developer, sold a 200,000 sq. ft office property in Saket, New Delhi, to an investor for Rs450 crore, nearly Rs200 crore cheaper than in 2007-08. Unitech didn’t disclose the identity of the buyer.
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The meltdown in the residential segment of real estate is known but the
situation is no better in the retail and commercial space
as well. Many projects across
the country have been badly hit and industry analysts feel that there is a huge over supply of retail and commercial space.
In fact, theres nearly 90 million sq ft of grade A commercial space that is blocked (lying unconstructed) across the top seven cities and more than 25 million sq ft of retail space that is similarly blocked. In the star category hotel segment, 3,000 rooms were expected to be opened
Even as demand seems to be returning slowly to the residential space, the retail real estate market continues to look disappointing.
The average vacancy across malls in major cities shot up to 19 per cent during the second quarter (April-June) of 2009 against 10 per cent in the last quarter. It is also expected that over 50 per cent of the estimated mall supply planned for 2009 will be delayed due to slowing construction and deferment of mall space, and also withdrawal of previously-announced retail projects.
According to global property consultant Cushman and Wakefield, the Delhi NCR (National Capital Region) is
Anup Nair was a proud owner of a 1,500 sqft office space in an A grade office unit in Gurgaon. When slowdown hit, he decided to put this space up for lease and move the entire office operations to his South Delhi unit. However, he did not get lease rates anywhere close to what had been quoted prior to the recession.
Even at lower rates it was difficult to find a tenant. However, in June 2009, he found a tenant who was willing to pay reasonable rates for fully furnished ready-to-move-in property.
Nair is no exception. The commercial property market today is
For the first time in the past five years, Mumbais commercial real estate market is headed for an oversupply with a total of 16.02 million sq ft of new commercial office space expected to enter the market in 2009. However, demand has been dipping steadily.
According to property consultancy Jones Lang LaSalle Meghraj (JLL-M), the demand for office space has dropped 60-80% compared to the peak period from late 2005 to early 2008.
Some parts of the city had seen rental appreciation of over 100% during the period on the back of demand from the banking, financial services and insurance
Slowdown in housing has now spread to office rentals. Gurgaon and some business districts in Delhi have seen a decline of up to 25% in office rentals in the June quarter. Meanwhile, office space demand saw marked moderation in Mumbai and Bangalore as office occupiers deferred their expansion and downsized their commitment.
According to the international property consultancy firm CB Richard Ellis latest report, the average rental in Gurgaons grade A office properties has declined from Rs 105 per sq ft to Rs 95 per sqft in June quarter, compared to the March quarter on the back of increased supply
