Commercial rentals in Delhi, Mumbai plunge

Published: May 21, 2009

Connaught PlaceCommercial real estate rentals in Mumbai and New Delhi have seen a steep decline of 24 per cent in the January March quarter over the previous quarter of the financial year 2008-09, according to a research report by Jones Lang LaSalle Meghraj (JLLM), a property consultancy firm.

“The biggest decline in commercial rentals have been in Mumbai and Delhi, down 24 per cent in the January-March quarter, followed by Kolkata, Hyderabad, Chennai and Pune, which were down 10-15% from the previous quarter,” the report said.

Further, as inventory piles up, rentals for commercial property do not appear to be heading north anytime soon. According to the report, “By the end of 2009, the total stock of ‘Grade A’ office space in Mumbai would exceed Bangalore, which has the highest stock at present.”

“There is plenty of inventory available. So, there is lot of scope for negotiation. Rentals have fallen across parts of New Delhi, but Gurgaon and Noida have seen the biggest decline. The average rate in Connaught Place, the business district of New Delhi, is around Rs 400 per sq ft,” said Ajay Rathore, CEO of Century 21 Integrated Property Solutions, a brokerage firm in New Delhi.

“India’s property market has cooled down following several years of rapidly rising rentals and aggressive development activity. Prime office rentals in the best sub-markets of Mumbai and New Delhi have fallen by 10-25% from the levels recorded at the end of 2007. Both cities continue to have huge development pipelines. However, financing woes have led to delays in planned projects,” said a research report from Knight Frank Newman Global’s annual review of global real estate.

“The vacancy rates are going up in the business district of Mumbai (Nariman Point, Colaba and surrounding areas). The rentals have fallen drastically. In some cases, intense negotiations have resulted in discounts of up to 35 per cent,” said Shreegopal Maheshwari of real estate brokerage firm Maheshwari & Maheshwari.

“Demand for office space in major cities in India remained weak as economic and business sentiment continued to deteriorate, particularly within the financial services and IT sectors. Any major increase in demand is unlikely in the near term. Rentals across prime buildings in the New Delhi and Bangalore CBD underwent a correction of over 10% while rentals in the Mumbai CBD suffered a 6.7% drop,” said a recent report on real estate sector from CB Richard Ellis (CBRE).

Says Anshuman Magazine, chairman and managing director, CBRE (South Asia),“With the global economic slowdown and substantial addition of supply in office space, rentals have declined across India. The office market rentals are expected to remain subdued in the short to medium term. However if the global economy begins to stabilise, I feel that the Indian economy would see the benefits earlier than many other countries, resulting in improved demand in the office sector.”

“While the affordable housing vertical is already in a growth phase, the commercial, retail and premium housing verticals are still in a corrective phase,” said another report on real estate sector produced by brokerage firm Motilal Oswal.

“IT sector, which was one of the largest consumers of office space, has slowed down its recruitments significantly. Three out of the top five IT/ITeS companies have reduced pace of recruitment considerably with Wipro reducing its head count marginally,” said another report on real estate compiled by Edelweiss.

Source:  Mydigitalfc

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