Office real estate remains steady in 2017, amid government policies

Although 2017 has not been a favourable year for the real estate industry in India, commercial space leasing has continued to be a popular trend in the industry. The net absorption of properties was 7% lower than the previous year. Global companies that have leased large commercial spaces in 2017 included Tata Consultancy, Microsoft, Amazon, Alibaba, Google, Deloitte, and Atos Origin. In the second half of 2017, office leasing has been one of the leading trends in the real estate industry. RERA in India and other developments on the global platform has led to the demand for commercial space in India.

The government has incorporated a number of stringent strategies for refining the real estate sector in India. As a result of demonetization and other economic policies adopted by the Government, the GDP rate in India showed signs of dropping in the mid-quarters. However, with the implementation of other policies, like RERA and GST, the real estate industry is likely to recover in the coming months. As a result of these regulatory policies, real estate in India has received a boost. More investors are likely to invest in the properties in the country, and the real estate sector is attracting foreign investment too. However, leasing of commercial space has not been much affected by the policies of the government.

In recent months, a large number of companies have made rapid expansions and are acquiring commercial spaces. Hyderabad has witnessed more than 10 large deals taking place in 2017. Among these, one deal involved the leasing of a 1.4 million sq. ft. space, which was leased by a global company dealing with consulting services. Over the last six quarters, Hyderabad has undergone growth in the real estate industry. However, with the government policies coming into force, the city recorded a decline of 3% in the net absorption. According to experts, the real estate industry was somewhat stagnant in 2017. However, with more transparency in the industry, it is recovering and is likely to get back the full momentum in 2018.

The continued demand for commercial real estate by the blue-chip companies and IT firms in Mumbai accounted for a major part of the net absorption in the city. Particularly, the Thane-Belapur Corridor witnessed the acquisition of commercial properties. The consulting and finance sectors, particularly, have gone for the front-office deals. In the last quarter, Pune, too, witnessed a surge in commercial estate dealings, mostly in the ITBTM sector.

In terms of rental values, Pune and Hyderabad had competitive rates. Evidently, the rising demand for commercial property due to the expansion of offices in the leading cities has led to this stability of office real estates. The real estate economy has absorbed the shock of three policies of the government. The situation is likely to further improve in 2018.