The office space absorption in India stood at 35 million square feet in 2015, which is the second highest absorption rate after 2011. While the vacancy in PAN-India stands at 16%, it’s just 8-9% that’s being supplied to the corporate occupiers.
The major cities like Bengaluru, Pune, Chennai and Hyderabad have a vacancy rate for office space is just 5-10%, and they are prompting the need for fresh supply to meet the growing demands. Though, the land and construction costs are rising each day, rents have not reached a point where developers can get an IRR (Internal Rate of Return) of about 20%. This has been a main reason for developers moving away from commercial projects.
Residential Real Estate
Though the year 2015 didn’t bring up the expected growth in residential real estate, the bad days seems to have vanished. The sales have picked up in a few major cities like Mumbai, Bengaluru and Hyderabad. The initiatives taken by developers like offering attractive schemes and deal terms along with the lowered interest rates seem to have engaged the fence-sitters. The signs look encouraging; so the year 2016 seems to put an end to the difficult journey of the sector.
Retail Real Estate
The year hardly saw major happenings in the retail real estate sector. However, two big trends were noticed.
· Consolidation of retail real estates by retailers and brands that focussed on the profit making stores closing down the loss causing ones.
· Entry of institutional investors; this would make the single brand retail companies undertake ecommerce business independently.
More and more mature investors are expected to come and buy built-up real estate spaces in 2016.
Manufacturing and Warehousing
The year did nothing except putting a solid foundation for the manufacturing sector to get going in 2016. Under the Make in India programme, the states can come up with their own strategies, schemes and policies, which would help them in fuelling the industrial growth. The warehousing sector seem to be reaching an inflection point and it’s sure to take a huge leap forward once the Goods and Service Tax (GST) is rolled out.
The real estate industry is getting matured each day; until 2014, the industry was highly inefficient, fragmented and unregulated. Though 2016 is expected to bring in some positive changes in the industry, the experts still feel that the industry still remains fragmented and moderately inefficient in 2016 as well! Only the growth in Indian economy can bring some favourable reflections in the real estate sector.
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