By: Sachin Sandhir, Managing Director, RICS, South Asia
Track2Realty: The commercial property market has slowed down, considering it has a strong correlation with global and economic factors and performance. The office segment has seen a pronounced dip, with absorption levels in the two major markets of Mumbai and Delhi-NCR seeing a year-on-year slump of 47% and 26% respectively, as per industry sources.
The retail sector too has seen a drop of over 65% in the total supply causing the retailers in cities like Delhi-NCR, Mumbai and Bangalore to actively lease space in superior quality malls.
Therefore, overall sentiment for 2013 is expected to be one of cautious optimism. The Wholesale Price Index (WPI) indicates inflation in the country to have fallen to a 10-month low of 7.24% in November.
Additionally, core inflation has declined to 4.49% in November as compared to 5.19% the previous month. Basis this development, some relief measures for both developers and investors can be expected in the form of decline in interest rates and increased liquidity in the near future. This could help stimulate demand for real estate and lead to better economic growth prospects.
On a positive note, the recent move by the government to open multi-brand retail to FDI will go a long way in strengthening organized retail in the country. For long now, the retail sector in India has been facing numerous challenges with respect to processes, technology, supply chain, real estate, infrastructure etc., resulting in fewer investments in the sector as compared to others, which have seen growth occur at a much faster pace.
FDI in retail will be a powerful vehicle in bringing the retail sector on the trajectory of the much needed growth. This will have a positive spill over on real estate as well, as with multi-brand retailers entering the market, retail property will witness renewed demand and uptake along with improved investor confidence in the sector.
As we step into the New Year, it is advisable that industry players focus on achieving operational efficiencies to improve construction productivity, delivery of projects in hand with the help of technological advances and commitment to improve delivery capabilities including up-skilling of existing manpower.
Therefore, efficiency, innovation and cutting-edge technology such as BIM and assembly line mass housing solutions may well be the keys to success, in addition to improved project delivery and execution skills and addressing the rampant capacity constraints across the built environment.
