Indian real estate has been a roller coaster ride for the commercial real estate firms all through the year 2018. The Real Estate (Regulatory and Development) Act, 2016 is still in the phase of showing its effects that includes more transparency and lesser debt liabilities of the firms.
However, the demand for the residential projects is still just above the ground. The interesting fact that has come into light is that commercial real estate property in 2019 is going to shape the market; in fact it is going to support the market players in the tumbledown game. Let us find out more.
Reports reveal the average property prices all over India have risen to Rs 5,545 per sq ft i.e. just 1% from the previous year.
Meanwhile, the commercial real estate in 2019 is showing upward movement in terms of demand.
For instance, the demand for office property rose by 19%, moving across 39 million sq ft. Office leasing as well, registered 15% gains during first three quarters of 2018 crossing 33 million sq ft. as compared to corresponding period in 2017.
Since the supply is constant the rentals are in check. Therefore the firms dealing in both kinds i.e. residential as well as commercial real estate have been able to do well.
And those with more towards the commercial segment i.e. office, retail and hotel, in their portfolio are expected to grow. Those with just residential segment in their portfolio are witnessing high interest cost to sales ratio.
The upward commercial real estate trend in India is expected to stay for at least two to three years in a row. Hence real estate developers in residential segment are seen to shift towards affordable housing in 2018. And others will continue to have the mix as the sales in commercial deals will help them as cushion in valuation of their companies.
Residential real estate scenario
Sales in residential segment have drastically come down from the year 2013-14. It is almost five years now and market continues to be sluggish. This has led to more inventory even after lesser launches across the country. Experts believe that it will take a considerable time for developers to clear the current stock.
The scenario is said to be worse in case of metro cities. Launches in Delhi NCR region are the lowest. Residential inventory with the builders remained 243 million sqft, which is equivalent to average sales of 63 months. In case of Mumbai, almost 29 million sqft remained unsold in residential segment, which is equivalent to average sales of 54 months.