Glut in Commercial Properties May Affect Real Estate Prices
Friday, September 14, 2007
Commercial properties in India are expected to drop in the next quarter, according to a report by real estate consultancy firm DTZ India. Tracing the price graph of the commercial property segment in the last quarter in New Delhi, Hyderabad, Bangalore, Mumbai, Chennai, Pune and Kolkata, the report states that Mumbai is the only exception to the trend, where demand outstrips supply.
The report further states that rentals of commercial properties would also level off in the next 6-12 months as more such properties become available in the market.
However, senior officials of real estate consultant Jones Lag Salle Meghraj see such a correction happening only in Whitefield, Bangalore, going by the rise in rentals in all metros, especially in Delhi and Mumbai. Simultaneously, capital values have also been rising with the hiked interest rates.
According to DTZ, overall absorption of space has dropped to 0.81 million sq. ft as compared to 1.5 million sq. ft in the previous quarter. Rentals have fallen from 15% in January to March to 5-7% during April and June.
In Bangalore, vacancy levels in new business locations like Whitefield stood at 35% as more properties became available.
In Hyderabad, 7.1 million sq. ft will become available in the market shortly; though demand for 4.6 million sq.ft.exists. Madhapur and Gachibowli, the new upcoming locations would see the most correction.
In Pune, in the new business districts of Viman Nagar, Kalyani Nagar, Hadapsar and Magrapatta, high vacancy levels have been reported, and rentals have remained static.
3.4 million sq. ft of commercial space in Chennai was added, but only 0.4 million was absorbed. The oversupply status will be further aggravated as supply will further.
In Mumbai, the demand has not eased, standing at 8% over supply. Rentals have been on the rise in Nariman Point and the Bandra-Kurla complex.
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