Commercial Real Estate Thrives in India
May 2018


The year 2017 is considered a landmark for the real estate industry. Several reforms and policies were introduced that brought transparency and accountability, adding to the credibility of the sector. According to reports, the Indian economy is projected to grow at 7% over the next three years and propelled by reforms like demonetization and implementation of GST, the commercial real estate sector is likely to remain robust and thrive in the future as well.

High Demand

Commercial real estate sector is riding high on account of the reforms introduced in the real estate sector. There has been a spurt in demand for Grade A office spaces and co-working places this year, especially in cities like Mumbai, Pune, Bangalore, Chennai, NCR and Hyderabad.

Increased Investments

According to the findings of the World Investment Report 2016-17, published by United Nations Conference for trade and development, India is ranked at the 9 th place in terms of Foreign Direct Investment (FDI) inflows. After the implementation of the Goods and Services Tax (GST), India has become a lucrative market for investors. Private Equity (PE) and capital flow are expected to grow and an increased foreign participation in commercial real estate is anticipated. Foreign Institutional Investors are expected to take leased and under-construction assets in the country.

Flexible Workspaces

One of the biggest trends in commercial real estate in 2018 is the concept of offering flexibility in workspaces. The cost-effectiveness and convenience offered by flexible office spaces is the reason behind their growing popularity. According to a report by Colliers Research, 4.6 million sq. ft. of space was leased by flexible office operators in the years 2016 & 2017. Several established developers are now taking a plunge to explore and find opportunities in this newly emerging segment.

Co-working Spaces

The concept of co-working space is finding many takers, right from freelancers to start-ups. The demand for co-working spaces is driven by automation, robotics and artificial intelligence technology driven companies. There are many factors that have contributed to the rise of co- working spaces, such as higher participation from Foreign Institutional Investors and strengthened corporate governance, besides the positive effects of the reforms introduced in the sector.

Demand for Built To Suit, ORCs

Information Technology & Information Technology Enables Services (ITes) companies in cosmopolitan cities like Pune, Hyderabad, Bangalore and Chennai are driving the demand for large, Built To Suit (BTS) office spaces. Office retail complexes (ORCs) is another segment that has emerged and offers a great opportunity for developers to mix retail and office spaces.

Going by several reports on commercial real estate sector, by the year 2020, top Indian cities will absorb 40 to 45 million sq. ft. of commercial space per year. As Tier 1 cities become expensive and the manpower cost mounts, many companies, especially those associated with technology and e-commerce are expanding operations in Tier II & III cities. The future certainly looks bright for the commercial real estate sector.