The country will continue to witness continued momentum of investments into the commercial office assets as new investment-grade projects are coming into supply in the next two years.
“This year is likely to herald a new peak (overtaking 2014) for inflows into commercial office assets, aided by a few large office deals that are currently under way,” said Anshul Jain, Managing Director, India of Cushman & Wakefield.
Big namesLarge project-level stake sales are by developers such as DLF from Gurgaon, and Hiranandani and K Raheja Corp from Mumbai are expected to propel the overall inflows into the commercial office sector.
“Buoyed by stability in the commercial office sector, as well as the potential to list under REITs, investors have been keen to plough in funds in leased office assets,” explained Jain. Reversing the general trend of residential investment surpassing commercial office sector inflows, the year will see inflows into the residential sector at ₹11,600 crore ($1.7 billion), roughly half of the inflows that are expected in the commercial office sector.
The expected total inflow this year into residential assets, therefore, is projected to be 44 per cent lower than that of 2016. Jain said “The momentum in the residential segment is expected to be slower as investors adopt a cautious stance towards the segment in light of the continuing subdued housing demand.” Developers are taking up fewer new projects as they remain stressed by slower sales and changing regulations that will be brought in through setting up of the impending Real Estate Regulatory Authority (RERA) in each state this year.
Jain said “The recent effort by the government to regulate the sector has been viewed favourably by investors. Moreover, the commercial office sector has been witnessing sustained high demand and investors are enthused by the opportunity in this space, led by impending REITs.” Despite global economic concerns, lower GDP growth projection due to demonetisation, and slower revenue growth forecasted in the IT-BPM sector, the office sector is seeing stable growth with adequate pre-commitments in key growth markets such as Bengaluru, Hyderabad and Noida.