Tag Archives: Global Real Estate News

Approximately 22% drop in absorption for office space in Q1 2015 over Q1 2014: CBRE

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Global Real Estate News, Jones Lang LaSalle India, Track2Realty, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2RealtyFollowing a particularly strong fourth quarter of 2014, the first quarter of 2015 reported comparatively slow activity on the office market front across leading cities. This apparent demand drop was largely because most corporate space occupiers were still strategizing their real estate plans for the year during the period, with fewer transaction decisions being implemented in the first quarter.

According to CBRE’s India Office Market View for Q1 2015, which reports on the status of Grade A office space across the country’s leading cities, total office space take up in Q1 2015 stood at more than 5 million sq. ft.—a drop of approximately 50% quarter-on-quarter (q-o-q) and a 22% drop year-on-year.

It is also worth noting that a number of corporates pre-committed to office space in leading under construction properties across the metros, which positively supported transaction activity during the quarter. In terms of transaction activities, therefore, it is the forthcoming months and quarters that will see the fruition of stratagems and negotiations made during the first quarter.

Commenting on the findings of the report, Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia said, “Demand for prime office space is expected to pick up in forthcoming months as occupiers implement their business plans across cities. The quantum of pre-commitments made during the first quarter is likely to boost space take up, going forward. An emerging trend likely to gain momentum is that of tier II cities, such as Chennai and Hyderabad, attracting demand for bespoke solutions from large corporate occupiers for their real estate requirements.”

More than 8 million sq. ft. of fresh investment-grade office space was completed across key cities during the quarter, meanwhile, indicating a q-o-q increase of around 4%. In line with trends observed during the second half of 2014, the first three months of the year saw completion of a number of large-sized office projects across the Delhi National Capital Region (NCR), Mumbai, Bangalore, Hyderabad, and Pune. New phases of existing SEZ projects were also completed in Gurgaon.

It was observed during the quarter, that pent up supply delayed from previous quarters had started to exert pressures across markets—particularly in the case of NCR, which led project completions, and contributed to around 53% of the total supply released during the quarter. Bangalore, Hyderabad, Pune and Chennai also reported fresh project completions. A subdued demand climate together with the significant supply addition of new office space led to an increase in vacancy rates in Delhi NCR; while vacancy levels in Mumbai and Bangalore inched downwards.

On the supply front, it is also worth noting that the slippage rate in prominent cities such as Bangalore and Mumbai was particularly high, with more than 80% of the supply that was initially lined up for completion during the first quarter getting pushed further into 2015. This was largely because most of this supply was located in far flung peripheral locations; and occupiers continued to adopt a cautious approach while considering such locations for their future operations.

Industry sectors such as IT/ITeS and banking / financial services are likely to remain the dominant demand drivers for office space, with engineering / manufacturing, e-commerce, telecommunications and pharmaceuticals being the other active sectors driving demand in this real estate space in India.

Rental values remained largely stable across most centralized office locations, with the exception of Bangalore where rentals appreciated by 5–6% q-o-q in core office locations due to strong occupier demand. Sustained occupier interest in well-leased IT and IT SEZ projects also led to a q-o-q rental appreciation of 5–6% across select micro-markets in Gurgaon, Bangalore, Chennai and Pune.

Source: Track2Realty

Reforms raised hope for directionless realty industry

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Global Real Estate News, Jones Lang LaSalle India, Track2Realty, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2Realty

Track2Realty-Agencies: After some neglect in the past several years, the realty industry in India finally saw some reforms that had a direct and indirect impact on its fortunes and which led to the some development of the sector in 2012. The prospect of a revival looks brighter once the central bank keeps it promise of cutting interest rates to spur overall growth.

A number of initiatives contributed to the real estate sector’s development in 2012. The window for external commercial borrowings was opened up for boosting credit flows to the fund-starved real estate firms with a cap of USD 1 billion for low-cost housing projects.

To further provide a fillip to affordable housing, the one percent interest incentive scheme for low-cost housing was extended by one more year. On the home loan front, the Reserve Bank of India (RBI) increased the limit for weaker sections to Rs.1 million and introduced a credit risk guarantee scheme for low-income home loans below Rs.500,000. Home loan seekers also got relief with the National Housing Bank scrapping pre-payment charges.

The high point of these reform initiatives was allowing 100 percent foreign equity in single brand retail trade and up to 51 percent in multi-brand format.

Supreme Court judgment terming the right to property a human right was another highlight.

The court said that the government cannot acquire land in the name of development without paying adequate compensation in time and enabling rehabilitation of those who either get displaced or lose their source of livelihood.

Other positive policy initiatives during the year which will have far-reaching impact on real estate development include government approving a plan for development of housing and basic facilities in slums across 250 cities to make country slum-free by 2020 and relaxing rules for land transfer to public-private-partnership projects.

But the most progressive and much-needed reform for regulating real estate business and land acquisition took a back seat, as crucial bills on these were not introduced in parliament. So was the case with incentivised policies to push affordable and rental housing and according industry status to real estate.

The year was also marked by many distinct trends. In the residential segment there was an increasing trend of pre-launch sales by cash-strapped developers to raise funds. The concept of pre-fabricated construction gained ground. The year also witnessed growing demand for affordable properties.

On the commercial office front, there were small-ticket transactions with increasing demand for smaller A grade offices. Corporates, focussing on controlling real estate costs, showed their preference for locations that were not in the central business districts to cut on rentals.

In the retail segment, occupiers preferred micro markets in different cities because of cost-efficiency, while developers focussed on inventories rather than launching new projects. The year also saw emergence of newer markets beyond top three cities.

Yet the year was clouded on investment outlook and saw the real estate sector battling economic slowdown amidst weak investor sentiment. The stressed realty faced a number of challenges like funds crunch, costly credit, rising property prices and falling sales.

Residential property which staged recovery somewhat in 2011, suffered a setback this year. Costly homes and high interest rates severely hit the affordability of home buyers. Land rows, dearth of good affordable properties and rising delivery defaults badly hit the consumer sentiment. So much so that even festive season could not help much in boosting sales.

Like residential, the commercial office segment also witnessed a demand dip in 2012. The low demand coupled with vacancy levels resulted in a slowdown in supply. Due to slowdown, the rental appreciation was marginal. The year is likely to witness a drop of 15 percent in absorption, though demand for well-located grade-A office space continues to be there.

Mall development was also adversely impacted by economic downturn, high real estate costs, and oversupply situation, with developers deferring new construction. But there was demand for good quality malls and rentals showed a stable trend. And now with foreign equity in retailing, the landscape is set to regain lost glory.

Looking ahead, a revival in realty industry is on the cards as economic conditions improve and interest rates come down, with an expected correction in property prices. But much will also depend on how seriously the government continues to pursue the path of reforms to boost growth.

Highlights of realty industry in 2012:

* 100 percent foreign equity in single brand and 51 percent FDI in multi-brand retail seen as boosting market for commercial and mall space.

* Foreign borrowings of up to $1 billion allowed for low-cost housing projects.

* Housing loan limit for weaker sections raised to Rs.1 million along with a credit risk guarantee for loans below Rs.500,000.

* Plan approved to develop housing in slums across 250 cities.

* Land transfer rules for public-private-partnership projects eased.

* Supreme Court terms right to property as human right.

* Crucial bills on land acquisition and real estate regulation deferred.

* Phenomenon of high property prices, low sales, land rows and project delays continues.

* Demand remained for affordable homes, smaller grade A offices and quality malls.