Residential launches decline but demand for commercial office space and retail properties continues to drive fund flows.
RERA and GST compliance is expected to remain a challenge for most developers of residential projects until the end of this year but commercial leasing is expected to remain firm, says Colliers Research.
In the first half of 2017, there was a 17 percent decline in the number of new launches in comparison to the second half of 2016 with 40,600 new units introduced in the prime cities.
Mumbai and Bengaluru were at the forefront with 35 percent and 33 percent of total launches, respectively, while Chennai, Pune and NCR accounted for the remaining 13 percent, 10 percent and 9 percent share. Commercial leasing remained firm with about 29 million sq ft of gross office absorption YTD, it says.
The number of residential launches does not seem to be improving in the second half of 2017 as most of the developers are engaged in adjusting their business processes in post-GST and RERA scenario. However, these policies will bring the much-needed transparency and corporate governance in the sector and have a long-term positive impact.
“While the real estate developers are gearing up to adapt and thrive in this new economic environment, transparent pricing, timely completion of projects and certified real estate professionals should help in attracting much more investment and likely to transform the Real Estate market,” says Surabhi Arora, Senior Associate Director, Research, Colliers International India.
The demand for commercial office space and retail properties continues to drive fund flows with a significant contribution from institutional players focusing on Real Estate Investment Trust (REIT)-compliant portfolios and key commercial and business hubs, it says.
In 2017 so far, global economic growth is strengthening, reflecting improving international trade, investment and manufacturing. As per Colliers International’s views on Asian markets, China, Hong Kong, Singapore, and probably Japan and India will achieve stronger economic growth in 2017 than most observers predicted six to nine months ago.
Additionally, the industrial and logistics sector witnessed increased activity in 2017 across the Asia-Pacific region. Manufacturers, logistics companies and industrial office developers are continuously looking for good long-term investment opportunities, particularly in countries such as India, Taiwan, Indonesia, Thailand and Philippines.
“The introduction of RERA is expected to be a game-changer for the real estate industry… logistics, warehousing and affordable housing is drawing the attention of both foreign and domestic investors who believe that these sectors can ensure healthy returns on investments”, says Gagan Randev, National Director, Capital Markets and Investment Services at Colliers International India.For the rest of the year and in 2018, we expect the warehousing sector to emerge as the dark horse as an increasing number of players, such as Warburg Pincus, Canadian Pension Plan Investment Board and Ascendas-Singbridge, are looking to disrupt the largely disorganised logistics market in the country. For instance, in April 2017, Singapore’s Ascendas-Singbridge Group acquired six warehouses for USD 83 million from Mumbai-based logistics and supply chain company Arshiya.