While the report of 2018 and 2019 shows either a slowdown or stagnation in some segments of residential real estate in India, commercial real estate, on the contrary, is overall thriving. Resultantly, the year 2019 surpassed the performance of 2017 and 2018. The demand for a commercial property only seems to rise.
Growth of commercial real estate in India
The Pan-India net absorption in commercial real estate was 28.7 million sq ft in 2017.
The Pan-India net absorption in commercial real estate was 33.2 million sq ft in 2018.
Considering the commercial real estate performance between January and September in 2019, the Pan-India net absorption is observed over 33 million sq ft. The net absorption rose to 105% from a year ago during the third quarter of 2019 (July-September). The ongoing pace indicates that the net absorption of commercial real estate will surely surpass all past benchmarks by going beyond 40 million sq ft by the end of 2019.
Deepak Parekh, Chairman, housing finance company HDFC Ltd. recently expressed his views on commercial real estate performance to a media house, " Commercial real estate is booming, particularly for the IT back-office sector and one never sees a slowdown in this. The increase in urbanisation, rapid migration and the rise in population of the youth in metros have lifted the demand for commercial realty".
Overview of commercial real estate in India’s prime cities
The office markets of India hold quite a vital position in the entire Asian commercial market index. The quarter 2 report of 2019 has declared:
Bengaluru's Central Business District (CBD) as the 5th fastest growing market in Asia.
Mumbai's Bandra Kurla Complex (BKC) stands at 8th position.
New Delhi's Connaught Place has been ranked in the12th position in the same report.
The top three sectors in the commercial market ruling at present are namely, IT-ITeS with a share of 43% of the total leasing volumes nationwide, flexible workplaces with a share of 14% and the banking, finance and insurance sector with a share of 12% of total leasing volume.
Experts believe that the commercial real estate from 2019 to 2023 is likely to have a significant demand of a commercial property India in terms of office space from technology, pharmaceutical, engineering and manufacturing sectors. Developers and investors have accordingly begun to focus on the commercial segment of the real estate sector. The ones who were purely indulged in building housing projects so far are now considering commercial projects as well. On the other hand, developers with a profile of delivering both housing and commercial projects are now shifting their focus more on the latter.
Report of July-September quarter in 2019 resulted in Hyderabad being on the first number in net absorption (36%) and new commercial project completions with 44% market share. Bengaluru, Delhi-NCR, and Mumbai stood after Hyderabad in net absorption and new project completions.
Some factors responsible for uplifting the commercial real estate in India
Standalone residential projects are trending less day by day compared to mixed land-use projects. Buyers prefer to live more in a multi-functional residence, which comprises of retails, offices, apartments, villas and hotels in one project.
As IT & ITeS hold the lion's share, the same sector along with e-commerce is also responsible for accelerating commercial segment growth.
Government initiatives such as Make in India, Goods and Services Tax, RERA, and Startup India resulted in a massive boost of the commercial sector. Citizens find it more lucrative to invest in commercial property