Year-end sentiments on the state of affairs in Indian Real estate
Rising investments in Commercial and Industrial market in 2018?
You would often see the sentiment of investments shifting basis the economic and political sentiment in the country. Looking at the friendly policies introduced by the government and a strong chance of repeat government is constantly driving the commercial real estate market.
Business sentiment is on the rise and it is well supported from the fact that grade A office leasing has risen from 500 million sq.ft. last year to 556 million sq ft. by October 2018 which is expected to touch 600 million sq ft. by end of this year. Although the Indian commercial grade A real estate market has occupancy of around 85% but a majority of this vacancy is in the upcoming micro markets. This makes the Indian sector a favourite for investments, business sentiments, and economic sentiments. Rise in the co-working and serviced office industry has also made office leasing more flexible and attractive for investors.
Recent observations in Private equity and emerging trends across various stages
Private Equity space has been closely looking at the serviced office segment, but hasn’t taken any large bets yet, also because of the fact that serviced office players themselves have not achieved a large scale in India to attract large investments from Private Equity. Overall,private equity investments in offices, warehousing, industrialspace has been fairly active.
Impact of Festive Season on Real Estate
In general there is not a large impact of festival over real estate industry especially commercial real estate, just that the transaction during this period is less since most decision makers happily enjoy their family time which anyone should for that matter.
Comment on NBFC liquidity crisis in 2018
I personally don’t see a fundamental challenge in long term liquidity crisis of NBFC’s;Recent increase in percentage of Bank lend ending to NBFC’s from 10% to 15% will support NBFC’s liquidity overall.
Some crunch which was long felt in the market is also from the fact that banks have become really conservative about their lending portfolio as a result of huge NPA’s by India’s most trusted private and public banks. Negative sentiment does create short term crisis.
Comment on the co-working trend. How has it progressed in India 2018?
Co-working trend has been growing faster than ever.With large enterprises preferring serviced offices, this space is still to unfold its true potential. Total of 15Million sq.ft has been absorbed by serviced office players till October 2018, constituting nearly 3% market share. In comparison to new office space absorption, serviced offices take up in the first 3 quarters of 2017 was around 1.5 million out of 30 million total absorption, compared to 3 million out of 31 million this year.
Serviced offices / Co working sector will see a lot of acceleration looking at change in accounting principles internationally where in leases will start reflecting on liability side of balance sheets. In addition, there is a fundamental shift happening globally as co-working / serviced office is solving real problems for occupiers. Not just from tenant side but landlords are fast realising that dedicating a segment of their real estate for flexible spaces adds a lot of value to their real estate portfolio.
Puneet Chandra, Co-Founder and Joint Managing Director,Skootr shares his thoughts.