The As­cent of Com­mer­cial Re­alty Mar­ket

The over­all real-es­tate sec­tor has wit­nessed a slew of pro­gres­sive re­forms which have set the path for in­creased de­mand for Grade A of­fice spa­ces as more com­pa­nies are set­ting up base or out­sourc­ing func­tions to In­dia. Girish Shah, Di­rec­tor, The Wad­hwa Gr

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The govern­ment has em­pha­sized on reg­u­la­tory mea­sures and pol­icy changes to in­fuse trans­parency in In­dia’s re­alty mar­ket. This has helped to im­prove in­sti­tu­tional in­vestor con­fi­dence and fa­cil­i­tate the re­turn of eq­uity and over­seas in­flows. Ad­di­tion­ally, it has en­cour­aged do­mes­tic fam­ily busi­ness of­fices, high-net-worth in­di­vid­u­als (HNIS) and NRIS to in­vest in the real es­tate mar­ket.

NEW in­vest­ment AV­ENUES

REITS will al­low in­vestors to in­vest in Grade A of­fice spa­ces and of­fer short and long term cap­i­tal ap­pre­ci­a­tion. This will pro­vide de­vel­op­ers with eas­ier ac­cess to cap­i­tal in the com­mer­cial sec­tor. REITS will def­i­nitely have a pos­i­tive im­pact on the seg­ment and we can ex­pect to see larger de­vel­op­ers adopt­ing this route in the years to come. More­over, RERA has brought about trans­parency and ac­count­abil­ity fur­ther im­prov­ing in­vestor con­fi­dence. The grow­ing de­mand has in­cen­tivized de­vel­op­ers to match this with ad­e­quate sup­ply and con­struct top qual­ity of­fice spa­ces and Busi­ness parks.

Grade A of­fice spa­ces are typ­i­cally lo­cated in the Cen­tral Busi­ness Dis­tricts (CBD) of the city and see de­mand from some re­puted names in the in­dus­try. The new mi­cro mar­kets and SBDS in Mum­bai are And­heri, Bori­vali, and Gore­gaon in the west­ern sub­urbs and the cen­tral sub­ur­ban dis­tricts of Vashi and Navi Mum­bai.

the chal­lenges & Po­ten­tial

The de­mand from sec­tors such as ware­hous­ing and lo­gis­tics, and FMCG showed pos­i­tive signs in 2016, and the same trend is ex­pected to con­tinue this year. More­over, many IT firms are now ven­tur­ing into the leas­ing than buy­ing. The govern­ment’s ‘Make in In­dia’ cam­paign and REITS will also help in­vestors in­vest in A-grade of­fice spa­ces from A-grade de­vel­op­ers.

The govern­ment has in­tro­duced pro­gres­sive re­forms in the res­i­den­tial and com­mer­cial re­alty sec­tor in the past year. How­ever, there are still some chal­lenges that need to be ad­dressed. Un­cer­tain­ties in the global econ­omy due to USA’S po­lit­i­cal sce­nario re­main a con­cern. An­other pre­vail­ing is­sue is the slow­down in the growth of GDP caused by de­mon­e­ti­za­tion. While it has af­fected the de­mand for of­fice spa­ces in smaller mar­kets, Grade A of­fice spa­ces by Grade A de­vel­op­ers in CBDS have not been im­pacted. The emer­gence of new com­mer­cial mi­cro mar­kets will also give a boost to in­fra­struc­ture de­vel­op­ment and be a ma­jor driver for the res­i­den­tial seg­ment. As far as rentals are con­cerned, there will be some sta­bil­ity in that as­pect. De­spite the emer­gence of in­dus­tries such as e-com­merce, lo­gis­tics, etc., we can still ex­pect to see BFSI and IT sec­tor to hold a sig­nif­i­cant share of the of­fice leas­ing space.

the idea of hav­ing a fixed of­fice space has changed sub­stan­tially. co-work­ing spa­ces/ new leas­ing mod­els are vi­able for star­tups and smes as they do not seek large of­fice spa­ces and it helps them save sig­nif­i­cant costs.

Girish Shah

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