There is glut in the commercial space market in the major metro cities due to poor sales and falling rentals. This has forced some of the Mumbai based realtors to turn the office space projects into homes, which is witnessing relatively high demand.
Oberoi realty one of the major developers are now thinking of converting their office space project Oberoi Spledor Commercial which is on Jogeswari –Vikroli link road, in Andheri into a residential project. Their move is welcomed by leading brokerage firms Motilal Oswal and IDFC securities. Property advisory firm Aperon Real Estate services MD Mr.Raja seetharaman says “Most of the current office space deals are aimed at cost reduction and that does not necessarily mean demand growth. Therefore, it is good to hedge your risk and go for residential, which is relatively easy to sell than commercial space that may take long to get absorbed.”
The demand for commercial space has gone down by about 37% across top Indian cities due to slower economic growth , cautious market sentiments leading to higher inventory. More realtors are trending towards residential projects as they can rely on customer advances unlike commercial projects where loans are expensive apart from the burden of private equity partner induction in some cases.
Last year, another major real estate developer Godrej Properties, had resized its projects in Ahmedabad and Hyderabad reducing the developable area to 24 million sq.ft. from 40 million sq.ft , focusing on residential area development.
Cheap Gold may hit real estate
Real Estate loses Shine as Gold Prices crashes
The Gold price has crashed sharply due to slowing down of economies across the world. Cyprus is selling gold to tide over economic crisis and Japan is also likely to sell give stimulus to its economy. The gold rates in India for 10grams, which had crossed Rs.32000/- few months ago, has sharply corrected to around Rs.25000/-. This has naturally led investors who were investing in real estate especially in NCR, Gurgaon and Mumbai to invest in gold.
According to a stock broking analyst of a leading firm the average gold import in India for the last two years is around $51billion which equals to the annual residential real estate purchase of about $48billion. But, the proposed new policy in SEZ doing away with the mandatory requirement of 10 hectares of minimum land area for setting up an IT / ITES SEZ will now make many IT companies set up their own SEZ. In Chennai and Bengaluru many IT companies who are having large areas can now covert them as their own SEZ. Many companies who have more than 1,00,000 Sq Mtr built up area criteria can now convert the balance land for residential use of their employees.
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