After the significant weakening of the realty sentiments in India in 2013-14, the investors were averse about putting their money into this sector. But after coming of Modi government, things changed for the country and for the realty sector as well. The scenario of office space absorption in India is now firming up and experts are suggesting that the commercial real estate of India is going to see its best time soon. According to the report published by Cushman and Wakefield, the office space absorption across prime cities has witnessed an increase of about 32% in the first half of 2015. The study was conducted for Pune, Hyderabad, Delhi/NCR and Bengaluru. This has created a lag between the office demands and office supplies. Though the supply has also increased by 20%, it still faces a crunch as opposed to the demand. This is a good sign for the economy as rising office space points towards more revenue generation for the country.
As the demand for commercial real estate rises, so does the need for residential units. For every 100 square feet of office space creation, there will be a need for 800 square feet of residential space, as reported by Sanu Sandilya in Economic Times. The housing market was also facing a hard time but is currently in the recovering stage. However, the complete recovery of housing market segment will take a long time. First, the affordable housing market will improve followed by the luxury housing segment.
Maintaining its previous record, Bengaluru topped the list, followed by Pune with a 162% year-on-year hike. Other cities like Ahmedabad, Hyderabad and Delhi/NCR reported a decline in office space absorption. The increased demand for premium office spaces has also led to this hike. Grade A offices, IT/ITes Sector and top-notch companies from other sectors want to provide their employees with luxury office spaces, thus leading to a considerable increase in the demand for premium commercial real estate.
To cash in on the sudden increase in demand, developers like Raheja, Supertech, RMZ, etc. are coming up with new commercial projects in popular parts of metro cities. The outsourcing industry is growing in India and is consuming the largest office space. By the end of this year, the office space absorption is expected to see a rise of about 18% in comparison to 2014. These trends suggest that commercial real estate in India is going to see its best time.
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