Demand for Commercial Properties Down 30 Per Cent in India

Posted on 18 September, 2012 by Jodee Redmond

Over the past 12 months, demand for commercial properties in India has dropped by approximately one-third. Industry analysts blame the drop in demand to the economic slowdown. Demand for rental units is also slower than expected in many locations, with a 15 per cent decline in some areas. In some parts of the country, office rentals are down by 50 per cent.

Credit to the commercial real estate sector grew by only four per cent in June. This figure was down significantly from the same month in June of 2011, when it was a much more robust 23.2 per cent.

A report prepared by brokerage firm Kim Eng Securities suggests that demand for office space is down in major cities worldwide. Office rentals have dropped by half in some locations. The report also goes on to state that real estate firms are shifting their attention from commercial properties to residential ones.

Mumbai’s prime office space rentals were down approximately 8.3 per cent from April to June compared to the same period in 2011. These rates remained relatively unchanged compared to the previous quarter.

Real estate developments were slow in the country’s national capital region during the second quarter. Total supply of Grade A office space was 725,000 square feet, which was the lowest level of inventory in the last five quarters. This level amounts to a decline of approximately 64 per cent over the previous quarter and 45 per cent over the same period last year. Demand across the region is down between 30-40 per cent, according to Anil Kumar Sharma, the chairman and managing director of real estate company Amrapali Group.

For retailers, the situation is worse. Demand for space is very slow, which meant developers also went slow on construction projects. Supply in the national capital region, Mumbai, Bangalore registered double-digit vacancy levels as a result.

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