3rd of the series
Track2Realty Exclusive
In India, investor interest is also seeing a slowdown on account of the lower absorption of new developments and the disparity between investment returns and capital values. With the investment outlook being more cautious than was the case earlier, capital values have already seen a decline and dropped 9 places to a global ranking of 21, turning negative for the first time since 2009. This is what is actually confusing the office space seeker like Rakesh Parashar and investor like Anupam Shetty.
However, Ramesh Nair, MRICS, Jones Long LaSalle says, “The oversupply situation may not be as bad as it was expected, given that the self correction phase has started with developers slowing down their construction and changing usage of their projects expecting a market correction. Many developers, especially in cities such as Mumbai, are today offering smaller units of space (even as small as 500-1000 square feet) in Grade A buildings. This is in sharp contrast to the scenario a few years back, where only much larger units were available. With banks and institutional lenders becoming more cautious about lending to the commercial real estate sector, demand for capital from private equity and NBFC funding has increased. Also the risk appetite of private equity investors has reduced further with preference for core and core-plus type investments in proximity to the city limits.”
Well, how far the commercial market will bottom out is something that brings speculative element into the business. What market indicators are leading to is the fact that an array of reasons—global financial uncertainty, shrinking demand, liquidity crunch, repo hike, demand-supply mismatch and others are forcing the commercial property in the red zone. This may not be good news for the commercial developers at large, genuine investors are finding the market lot more affordable at the moment. And hence the year 2012 seems to continue as the buyers’ market.
