Indian Commercial Property Market- Key Aspects That Have Re-Defined Commercial Investments

India as a developing nation has encouraged residents by offering alternatives in the commercial property market. With cities like Bangalore, Pune, Mumbai, and Hyderabad offering high paying employment prospects, the demand for commercial spaces have increased significantly. NRI investors who have started businesses are considering to invest in office spaces for formidable returns in investment. Residents are now opting to reside as tenants and invest their hard-earned money in commercial spaces to capitalize on a secondary source of income. The inclusion of governing bodies and tax reforms has improved market trends and redefined commercial property investment options. Let’s now have a look at how the commercial realty market has performed during the period from January- June’2019.

Impact of RERA and tax reforms like GST on the commercial market

Previously, the Indian property market wasn’t performing to its utmost potential. Expectations set by developers weren’t met which delayed project delivery. The introduction of RERA has brought about a change as there is a regulatory structure that monitors infrastructure development. However, introductory policies have minimized the extent of financial assets in order to cater to residential structures. Also, this has affected the sales which aren’t good for the progress of the industry. This decrease in demand in residential housing structures has encouraged the commercial market to flourish. IT corporations and entrepreneurs are capitalizing on key opportunities to own office spaces for respective business operations.

Year on year supply to demand statistics

Emerging metropolitan cities have recently struggled to cope up with the supply to the demand ratio. Variable factors have affected the way developers cater to the demand for residential and commercial properties. On the upside, the market has witnessed an increase in supply for commercial spaces to a colossal rise of 23.9 million sq.ft and contributes to 31% in the last year. This is an encouraging aspect as the demand for co-working spaces has increased owing to rise in surrounding infrastructure development. Considering to invest at this opportune time would help first-time investors earn formidable returns to save up for a certain future.

Demand generated by IT corporations

Cities like Pune and Bangalore are heavily influenced by IT corporations. Multinational companies are beginning to realize the importance of investing in India for diverse benefits. With high profiled employment prospects, residents are flocking to other cities for a profitable lifestyle. Commercial transaction records state that demand by IT/ITES for commercial and co-working spaces has increased and contributed to about 27.4 million sq.ft. This transition for residential to increase in demand for commercial spaces has effectively contributed to the national economy as well.

Bangalore reaches a historic landmark in terms of supply and commercial transaction

There are certain cities in the Southern part of India which have contributed immensely towards the property market. Be it new launches or releasing stocked inventory, Bangalore, renowned as the IT capital of India has performed significantly better than its counterparts. The city has created history by promoting commercial property transactions to 8.3 million square meters. Meanwhile, the supply has evidently increased by over 100% at 7.6 million square meters from January- June’2019. Another fascinating aspect of investing in commercial properties is the rate of rental growth, depending on surrounding infrastructure development. Ahmedabad has witnessed rental growth in commercial properties of 14.3% while Bangalore and Hyderabad have contributed to 13.5% and 11.3% respectively.

Contribution by the IT sector

Information technology has been a key component of rising demands for commercial properties. With a diverse range of job prospects available across emerging metropolitan cities, it becomes inevitable that the commercial and office spaces are bound to provide fulfilling returns on investment. The IT sector across India has contributed to about 35% of commercial transactions from January- June’2019 when compared to about 28% in 2018. Meanwhile, the Banking and Insurance sector has performed considerably lower and declined by 13% in H1 (January- June’2019) compared to 18% in the previous year.

Growth in the number of banks and financial institutions

With the rise in the number of banks and financial institutions, the current commercial market trends look promising. With several players in the market, there is a definite increase in demand for commercial and office spaces, which is motivating the industry to increase the extent of supply for further infrastructure development.

Co-working spaces to take the commercial market by storm

As mentioned above, India has noticed a sudden rise in demand for co-working spaces. IT professionals consider staying close to places with a unique work environment and network with like-minded professionals. Developers who are providing co-working spaces have contributed to about 4 million sq.ft of commercial space that constitutes 15% of overall property transactions and a significant increase of 42% over the last year. The strong demand for commercial and office spaces has resulted in lesser vacancy and stocked inventory. For instance, Bangalore has reported having single-digit vacancy rates which are astonishingly great and uplifts infrastructure development in the future.

In conclusion, investing your hard-earned money in the commercial property market can help you with high rental returns and stabilize your financial future.

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