1st of the series
Track2Realty Exclusive
Global financial uncertainty, shrinking demand, liquidity crunch, repo hike and demand-supply mismatch…all is not well with the commercial real estate in India. However, Track2Realty noted that key demand drivers may be in red but expecting market to bottom out is purely speculators’ business. Genuine investors may look forward to occupy the space at lucrative rates in the year ahead.
It was in the early 2011 that Rakesh Parashar went on office hunt in one of the commercial hotspots of Bandra Kurla Complex in Mumbai. The astronomical high rental of Rs.300 per sq ft with a take-it-or-leave-it gesture of the property dealer forced this marketing consultant to compromise with the locational advantage and settle for a relatively moderate office space. Within six months it seemed the world had changed and the very same set of people started calling him repeatedly with an offer of Rs.225 per sq ft ready-to-use space in the same locality. With no real estate background, it left him wondering as to whether it was a joke or there was some method in the madness.
The fact, however, is that the commercial property market has been the first casualty of the economic slowdown and with exception of euphoric early 2011 revival indications, it continues to be the buyers’ market than sellers’ market. Once hailed as the growth engine of the real estate industry, the commercial realty is increasingly becoming a liability for the developers and the existing prime projects have no takers. With the shortfall in demand and liquidity crunch even the business model of the commercial realtors has taken a shift. Many of the upcoming commercial realty projects have come to a standstill and the lease model has instead been converted into sale model. While many of the office space remain unoccupied, the retailers in the malls are bargaining hard to renegotiate the price, include minimum guarantee clause in the agreement and get into a revenue sharing mode. And, of course, the big brands continue to enjoy the liberty of even free anchor space.
This market reality brings to the fore the question as to whether 2012 is the year to invest in the commercial real estate opportunities? That is the dilemma Anupam Shetty, a Mumbai-based advertising professional has. With a decent house in Andheri East, now he wants to invest around Rs.35 lakh in another property. That amount is not enough for a second house and he does not want to go for another housing loan in this repo rate uncertainty climate. He is planning to buy an office in the suburbs which could be leased out for the time being and later could be used for his own prospective business. Problem is Anupam is not sure how far the commercial property is set to bottom out in near future.
…to be continued
