What 2016 have in store for Indian real estate

Every Residential Places Needs Commercial places as well

The experts feel that by the fall of 2016 there are signs of recovery in the real estate market which signals the end of the painful journey of the sector till now. India is seen today as the land of opportunity for both business and investment. Let us look into the year 2016 by gazing at what happened in 2015.

Office and the Commercial sector

There is an interesting fact relating to the office space absorption in the Indian real estate in 2015. The absorption rates went as high as 35 million sq. ft. which is the second highest figure in the history of the country after 2011. While the vacancy at the pan India level stands at 16 percent even now the realistic vacancy of commercial space is at 8 to 9 percent. For Example the risen need of residential property in Mysore road attracts many off-source investors to make commercial places here. The reason is although the vacancy was higher; the realistic vacancy was lower which a trend of the corporate is. This means that the demand in 2016 will also be there. There was a rise in the rental prices across the major markets of India. 

The projection is that the demand will remain constant over most of the period of 2016 with the positive bias being shown by the corporate occupiers. The trend watchers also remark that there will be a continued demand for the leased spaces but there may be a mismatch between the supplies of quality office space.  This also means that there will be higher demand of grade –B office space.

Rise in Capital gain over the year 2015

Growth of the Capital Markets

The capital market activities were fairly interesting in the real estate sector. The private equity continued to remain very high in the real estate market especially in the commercial sector. The entity level investments also were high which indicated the investor’s confidence. If you look at the focus of the assets the residential sector did attract considerable amount of funding but when it comes to equity investment the volume was low and insignificant for the residential sector.

The statistics reveal that the office space yielding income did attract the majority of the private equity investment in 2015. The investments in the tier I cities were more with Bengaluru, Mumbai and NCR attracting the most of the investments. This accounted for the 73 percent of the investment which the experts state is a state where a great stage is being set for the year 2016 to be highly prospective. The trend watchers opine that 2016 may witness the same kind of investment activities noted in 2007.

Residential Sector:
As far as the residential sector demand is concerned there was not such a great hope and optimism in the market in 2015. The sales have picked up in the major markets like Mumbai, Bengaluru, Hyderabad and the NCR. This primarily happened because of the government measures and lucrative offers or claims by developers to boost sale. In the markets where there were excessive unsold stocks the launches did reduce and the consumer’s sentiments have improved a lot. The RBI also has been reducing the repo rates continuously to increase the buyer’s confidence and assessment of affordability. There is another indicator that is also a plus to the market which is the increased growth of the demand of the office and commercial sector which will surely surge the residential sector demand. The myth goes that for every 100 sq. ft. absorption of office space there is a demand of 600 sq. ft. of residential spaces. This means that there is a great hope for the residential sector to turn around to great heights. The indications have already started showing in major markets like Bangalore, NCR, Hyderabad, Pune, etc. The sale of residential apartments in Bangalore, Pune, NCR, and few other cities have already started picking up but don’t do such mistakes while buying property.  The stage is set for 2016, opine the experts.

The retail market:

In 2015 there wasn’t any addition of quality retail space in the market. But even then the trends noted were that there was entry of institutional investors which is expected to bring the retail brands to come and explore the Indian market anew.

The industry experts note that there will be entry of the mature retail investors who are predicted to come and invest in the built-up and ready to move in retail space. It can be expected that once their foothold is strong in India they would invest in the ‘greenfield’ assets. There will be a dearth of quality retail spaces opines the experts as the demand will overpower the supply and regarding this the experts say that retailers will have to be flexible in their approach and customize according to the availability and conditions of the micro-market.