Will cor­po­rate realty ac­tiv­ity im­pact hous­ing mar­kets?

Hous­ing de­mand likely to pick up in pe­riph­eral lo­ca­tions of lead­ing cities

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Cor­po­rate real es­tate trans­ac­tion ac­tiv­ity rose by 18% year-onyear in 2015 to cross of­fice space ab­sorp­tion of over 38 mil­lion sq ft across the lead­ing cities of the coun­try. Al­most 32% of this de­mand for of­fice real es­tate was gen­er­ated in Ben­galuru, fol­lowed by 23% share of the same from Delhi Na­tional Cap­i­tal Re­gion (NCR). The top sec­tors driv­ing this sig­nif­i­cant de­mand for cor­po­rate real es­tate were the IT/ ITeS, bank­ing and fi­nan­cial ser­vices, and the e-com­merce sec­tors.

While a ma­jor chunk of th­ese trans­ac­tions were for mid-sized spa­ces, a sig­nif­i­cant vol­ume of of­fice space trans­ac­tions also took place for large-sized spa­ces of above 100,000 sq ft. in 2015. Most of th­ese large sized trans­ac­tions, more­over, were closed in the Ben­galuru, Gur­gaon and Pune of­fice mar­kets dur­ing the year. Mean­while, new sup­ply of cor­po­rate of­fice space in­creased by 40% year-on-year in 2015, with most of this fresh space com­ing up as com­mer­cial of­fice and SEZ space.

With so much hap­pen­ing in the cor­po­rate real es­tate space in the coun­try in re­cent times, there are bound to be pos­i­tive f all­outs of such ac­tiv­ity in In­dia’s res­i­den­tial mar­ket as well. When large of­fice com­plexes, IT Parks and SEZs at­tract an equally sig­nif­i­cant vol­ume of em­ployee foot­falls, along with the foot­falls of re­lated busi­ness per­son­nel, it is likely to cre­ate op­por­tu­ni­ties for al­lied real es­tate port­fo­lio such as res­i­den­tial, retail and hos­pi­tal­ity seg­ments. Fur­ther­more, it is likely that sig­nif­i­cant op­por­tu­ni­ties will be cre­ated for hous­ing projects tar­geted at cor­po­rate em­ploy­ees in the vicin­ity of com­pa­nies with large cam­puses and of­fice com­plexes. A size­able sec- tion of the cap­tive work­force of large of­fice dis­tricts will likely seek hous­ing op­tions near their work­places or in es­tab­lished res­i­den­tial neigh­bor­hoods in the vicin­ity of of­fice hubs.

The in­dus­try sec­tor that has the max­i­mum im­pact on the coun­try’s hous­ing mar­ket, more­over, is the IT/ITeS sec­tor. It is heart­en­ing to note that the IT/ ITeS in­dus­try pri­mar­ily drove the of­fice mar­ket in 2015, with nearly 56% share of the to­tal ab­sorbed cor­po­rate real es­tate space across lead­ing cities. Cities such as Ben­galuru, Gur­gaon, Chen­nai and Pune, which have a sig­nif­i­cant IT/ITeS pres­ence is likely to at­tract sig­nif­i­cant mi­dend hous­ing de­mand from their IT work­force.

With an in­creas­ing num­ber of cor­po­rate firms set­tling for cost ef­fec­tive and avail­able qual­ity of­fice prop­er­ties in the pe­riph­eral lo­ca­tions of lead­ing cities, a size­able vol­ume of the up­com­ing hous­ing de­mand is also likely to fol­low the trend to af­ford­able res­i­den­tial op­tions in th­ese pe­riph­eral neigh­bor­hoods. Lo­cal­i­ties to look out for might in­clude projects at Ben­galuru’s White­field and Outer Ring Road mi­cro- mar­kets, along the North­ern and South­ern Pe­riph­eral Roads in Gur­gaon, and at Hadap­sar and Agarkar Na­gar in Pune.

In ad­di­tion, cor­po­rate re­lo­ca­tion to pe­riph­eral mi­cro-mar­kets that are specif­i­cally ideal for res­i­den­tial real es­tate as well as of­fice spa­ces may also cre­ate op­por­tu­ni­ties for mixed- use, in­te­grated town­ship projects. While such al­lied real es­tate op­por­tu­ni­ties ex­ist, how­ever, the si­mul­ta­ne­ous de­vel­op­ment of large scale in­fra­struc­ture projects in­clud­ing so­cial in­fra­struc­ture is cru­cial for this real es­tate de­vel­op­ment to be­come suc­cess­ful.

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