Commercial Properties in India: Driving the Realty Sector

Contrary to the speculation that the real estate market will witness a slow down in the near to medium term, the demands for commercial properties in India have gone all time high in the seven months of 2006. The increased demand for commercial properties (office space in India) indicates enhanced business activities and so more job creations. This would also lead to demands for residential accommodations as well.

According to a study conducted by leading global real estate consultancy firm, Delhi has recorded the highest ever commercial space absorption in a year. In the first seven months of the current calendar year, the city has witnessed absorption of over 5.1 million sq. ft. of office space as against that of 3.5 million sq. ft. in the entire 2005 showing a growth of whopping 42%. In Bangalore, absorption of grade A commercial space in the first seven months of 2006 is seven million square feet as against 9.28 million sq. ft. in the whole of 2005.

The commercial properties or commercial office space in India is dominated by the IT/ITES sector that accounts for approximately 80% of the total commercial space absorption in India. As the IT/ITES sector is expected to grow about 30-35% in the next 3-5 years, the same can be used as a basic benchmark for estimating the growth of commercial office space real estate sector.

According to a report, a demand of around 150 million sq. ft. of office space in India is required from its top six cities- Bangalore, Hyderabad, Chennai, Mumbai-Pune, NCR and Kolkata in 2006-2010.

According to a report, numerous factors have contributed to this increasing commercial properties demand all over the country. NCR has edged over most Indian cities in the demand for commercial property due to its improved connectivity, better infrastructure and availability of skilled human resource. Because of the Commonwealth Games, transportation, hotel accommodation, security and all other supporting infrastructure are getting a boost.

The retail boom that is being witnessed in the past few years is bound have a significant impact in the commercial real estate sector too. The retail revolution is also spinning in fast. Historically, the stand-alone next door shop was first. Then came the chain stores – most notable amongst them was the A & P Chain Stores of the USA. Departmental stores were next. India is being swept away malls.

The retail sector is growing at the rate of 20% per annum and more important, the organized retail sector is estimated to grow from 2% of the total retail market in 2001 to 22% or more by 2006. Most of this rapid growth will be in the large metropolitan cities.

All the major Indian cities have major commercial projects under construction for retail purposes. In fact, the retail sector has provided the primary boost to the commercial property market all over India. Presently, there are over 55 large shopping malls under development all over India. Many foreign players are entering the Indian market to buy commercial properties in India to set up their chain of retail stores. The retail sector is also getting acceptance in the job market with more and more business schools focusing on the sector and large retailers setting up retail academies. This sector is estimated to create 50,000 jobs per year in the next five years.

The bottom-line is that this is the time to go shopping for property; as the market has started firming up already. As the organized market develops, real estate as an investment is one of the better options available today.