45
A survey on FDI in India, saw 53
percent of respondents confirm
that the country is still an
attractive FDI destination
According to the Colliers International report, weak office
market sentiment will continue across the country until global
credit lines are opened up once more. A host of companies are
downsizing their real estate requirements and are relocating
themselves to other less costly locations which has meant a rise
of prime office space vacancy levels. The report also highlights
the fact that the mismatch between demand-supply dynamics
that there are consensus and consistency regarding policy will compel developers to be more innovative/creative in offering
direction.” In terms of the breakdown of FDI, Sinha reported that lease incentives to prospective as well as existing tenants.
investment from the UK, US and NRIs currently accounts for over Lack of liquidity and the drop in demand has also resulted in an
50 percent. “But as the FDI pie expands, new sources of capital, increase of delayed/on-hold projects which will mean marginal
including from the Middle East, are emerging. This did not occur new supply coming online during the remainder of the year. A
six or seven years back. More important than the actual flow is re-strategising of new business models and the introduction of
the conversion. The investment community has acknowledged lessee incentives are also under consideration, such as rent-free
that India is an attractive FDI destination,” he added. periods, additional and better facilities/services, and favourable
lease agreements. Colliers also recommended the targeting of
In Colliers International’s Q1 2009 India Property Market industries less affected by the global crisis, such as pharmaceuticals,
Overview, Amit Oberoi, national director C&V and research, telecommunications and government organisations.
said: “Following the financial shock, there has been a paradigm
shift in the perception of risk, resulting in a liquidity crunch and Overall the residential sales market is faring slightly better with
weakening demand. For most Indian real estate markets, this demand present in the low and mid-level markets, but with volumes
has been made worse by the over-building. “In line with the likely to remain static in anticipation of a further decline in prices.
previous quarter, Q1 2009 continued to witness low absorptions; According to Colliers, the premium segment of residential
increasing vacancy rates; decline in rentals and a sharper decline properties has slowed down considerably, in terms of both
in capital values; and increasing cap rates. However, in contrast to supply and demand, across the entire country and a mismatch in
the previous quarter, there was more interest expressed in leasing prices still exists as developers mull over the restricted capacity
and acquiring property. Projects launched at competitive prices for further price correction while, at the same time, buyers are
received a good response.” anticipating further declines. Mid-level housing is expected
to remain the preferred option among developers looking at
Clarifying the situation in the commercial sector, Oberoi said: across-the-board demand. A move by developers to restructure
“Office rental values between Q1 2008 and this quarter have existing projects under construction through the adjustment
witnessed a drop of 10 to 30 percent across major metros. This of specifications and a decrease in unit size (bedrooms) is
percentage will be higher if we compare Q1 2009 rentals with peak targeting the first-time buyer market, which is witnessing
rentals in mid-2008. With expansion plans on hold and firms looking increased demand. On the financing front, developers are also
to reduce their overheads, most markets are witnessing addition to initiating various schemes including the payment of Equated
the inventory through space available for sublease. Citing correction Monthly Installments (EMIs) for home-owners who have been
in office rentals, tenants are seeking lease renegotiations and more retrenched, buy-back offers and rent to own programmes;
incentives from landlords. The visible downward pressure on rentals however, so far, these initiatives have not seen a resultant
is likely to continue in the short term. In the residential market, revitalisation of transactions. Demand for premium residential
affordability continues to be the key mantra. While the industry lease market is also expected to remain low due to shrinking
grapples to define affordability, the realisation has drawn that the tenant budgets, a decrease in the number of expatriates and
key to low cost housing lies in the pricing of land and its location with corporate cost-cutting measures. But, on a positive note, with
respect to employment centres. Buyers continue to hold on, due to increasing competition in the housing finance sector, the drop
the perception that prices will fall further. On the brighter side, the in interest rates and tax incentives given to housing sector, the
residential sector is becoming more inclusive, as lower prices are number of disbursements and home loan seekers has increased.
allowing more people to own houses. First time home buyers remain And this has meant that the low to mid-level budget sector
a key demand driver.” continues to develop.
t
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