Net leasing of office space in India will grow 10-15% this fiscal to 28-30 million square foot (msf), says the latest report by rating agency CRISIL Ratings. Similar growth will be seen for the next fiscal for the leasing number to reach 31-33 msf, the report says, attributing this growth to an improvement in demand as employers increasingly favour employees working from office.
While demand will be below the pre-pandemic high of 42 msf in fiscal 2020, it will be within a sniffing distance of the fiscal 2019 mark of 34 msf.
Occupancy levels will stagnate at 84-85% this fiscal, against the earlier expectation of an improvement by 100-150 basis points due to deferment of leasing plans. However, the occupancy level is expected to inch up by over 100 basis points to 85-86% next fiscal as leasing activity picks up.
“While global recessionary headwinds and slower hiring in technology may lead to a possible deferment of leasing plans, thereby subduing demand growth in the next two quarters, the strength of the Indian economy and competitiveness of commercial real estate will keep the demand drivers intact,” the report adds.
“After gathering pace in the first half of this fiscal, office leasing will fall back temporarily in the second half. Next fiscal, leasing growth will be supported by three factors. One, the IT/ITeS sector, which accounts for over 45% of Indiaās office leasing space, will continue to witness low single digit employee addition4 in the current and next fiscal. Two, physical occupancy at offices across sectors, will increase from 30-50% at present. Three, the Indian economy will remain resilient and sectors such as BFSI, consulting, engineering, pharma, and e-commerce – accounting for over 30% of Indiaās office area – will add office space,” says Anand Kulkarni, director, CRISIL Ratings.
A CRISIL Ratings analysis of players with over Rs 63,000 crore debt and total leasable area of over 170 msf also indicates that credit profiles of commercial realtors will remain healthy in the milieu, backed by adequate leverage.
Average rentals in India
According to CRISIL, Indian cities provide highly competitive rental rates. Average rentals in MMR, Bangalore and NCR are at Rs 130, Rs 95 and Rs 80 per square feet, respectively. When compared to their Asian peers such as Shanghai (Rs 275), Seoul (Rs 200) and Manila (Rs 150), rentals are lower in India.Ā Rentals here are significantly lower than global metro cities such as Singapore (Rs 650), Hong Kong (Rs 500), Tokyo (Rs 550), Sydney (Rs 400), London (Rs 600) and New York (Rs 550), the report adds.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
sunita.mishra@proptiger.com
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