Developers shelving projects as huge built-up space lies idle
The commercial real estate market across the country is facing a crisis with real estate consultancies estimating an excess supply to take care of next four years of demand. As several millions of commercial space is lying idle in Mumbai, Bangalore, NCR, Chennai, Hyderabad, Pune and Kolkata, developers have shelved their commercial projects and converted them to residential projects at several places.
Over 50 million square feet commercial space is lying unused in Mumbai, especially at Nariman Point, while in National Capital Region the inventory stands at 23 million square feet, Chennai 21 million square feet and Hyderabad and Pune 15 million square feet each. Ahmedabd has inventory of 6 million square feet, Kolkata 10 million square feet and Bangalore around 25 million square feet.
The excess supply is estimated at around 166 million square feet of ready and under-construction (to be completed within the next 1 year) commercial space across these cities, according to Pankaj Kapoor, chief executive officer of Liases Foras. He says on an average, there is inventory of around 50 months (approximately 4 years) in each city.
According to RESSEX (Real Estate Sensitivity Index) data, over 50 million square feet of inventory in commercial space is there in Mumbai, while the inventory in Bangalore is estimated to be around 25 million square feet. National Capital Region comes a close third at around 23 million square feet, followed by Chennai with 21 million square feet. Hyderabad and Pune has 15 million square feet each, while Kolkata and Ahmedabd have an inventory of 10 million and 6 million square feet respectively.
Commercial Real Estate prices across the country has seen a correction of over 25 per cent across the country due to dwindling demand, says Anuj Puri, chairman and country head of Jones Lang LaSalle.
Sarang Wadhawan, vice chairman and managing director of a leading commercial space developer HDIL, told Financial Chronicle, that they would go slow on commercial projects. “We will not execute all of them immediately as planned earlier. Sure, demand has slowed down due to uncertainty in the economy and companies cutting down on expenses leading to poor absorption of commercial space,” said Wadhawan.
HDIL at present is developing 9.29 million square feet of commercial space across the country. Godrej Properties, another major player, is now repositioning two prime projects – Godrej Garden City in Ahmedabad and Godrej Oasis in Hyderabad – with a focus on residential development as demand for commercial space is shrinking, as reported by FC last week. Pirojsha Godrej, executive director of Godrej Properties, said that they changed the business model for two projects to largely residential in nature.
Real estate prices in Central Mumbai, Bandra Kurla Complex and Andheri have seen sharp correction from its peak over last few months.
Source: http://www.mydigitalfc.com/news/demand-commercial-realty-dwindles-metros-421
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