Commercial realty segment reviving

20 Nov 2009, Vivek Shukla,

Even as residential market picks up and end users flock back to
book their dream homes in various housing projects, action is slowly gathering
pace in commercial realty market too - after a long time, there
is a positive movement here.

While it will take at least two years for DLF Corporate Green
building in Sector 74 in Gurgaon, near Haldiram, to become
fully operational , the construction is giving a huge boost to
 commercial realty scene.

There is a definite buzz in market for this latest offering from
the stable of a market leader. This is all the more surprising
considering that rentals in good buildings have also seen big
slump in Delhi, as well as in NCR towns.

As if this were not enough, there is a glut in available space
 in most of the buildings in these areas. A lot of office space
 is up for grabs as many big-ticket companies have shifted
from bigger to small offices in the past few months after they
 were hit hard by economic slow down.

A large number of companies resorted to such measures
in order to reduce their overheads. The number of companies
 which were occupying 10,000 sq feet or more space and then
shifting to smaller spaces is not small.

In the world of realty, any office that is spread in an
 area of 10,000 sq feet is considered big. Despite all this,
 DLF Corporate Green has, in a way, became a test case
to prove that commercial market is also getting back into its own, slowly.

Sanjay Rai, spokesman of DLF, says while he cannot say
 with certainty that their new offering would revive activity
 in commercial property segment, there are three very
 important factors in realty sector that play a key role in
determining demand of any residential as well as commercial
 buildng: one, right pricing ; two: right location, and three: track
 record of the realty firm in terms of completing their project.

If any property has all these three, it is bound to attract the
attention of customers, Rai feels.

"I couldn't agree more with these three points," says Devender Gupta,
 CMD, realty advisory Century 21 India, adding, "I feel the pricing
in the case of DLF Commercial Greens is very significant.
They have fixed Rs 5,200/sq feet in their new building when
the current rates in commercial buildings in same area are
 hovering between Rs 6,500/sq feet and Rs 7,500/sq feet.
You would not get commercial space at Rs 5,200/sq feet
in any commercial buildings like Unitech Business Zone,
 Times Square, ABW Tower and other such buildings.
These buildings are either on Iffco chowk or close to it."

Zafar Iqbal, formerly of Indian Administrative Services
and an expert on land related matters, says as economy
is showing definite signs of improvement and the affects
of economic slowdown are disappearing, the commercial
 side of realty is bound to see better days. He says that
even though enough space is on offer in prestigious buildings,
there will still be enough demand for good buildings in nice
locations elsewhere .

But, there is another opinion that due to various counteracting
 factors, it will not be easy for commercial projects to create buzz in market.

A spokesman of Integrated PanRealty Solutions Private
Limited says while it is true commercial properties look to be
 in for better times, the situation is nowhere close to developments
 in residential projects. Explaining his stand, he says getting a loan
for a residential project is much easier compared to getting one for
a commercial project, as investment ticket size is bigger for commercial
 projects than in residential projects. In this scenario, it will take some
 time for commercial properties to be sold like hot cakes.

Some also say lease rentals are low due to poor demand of
 leased spaces; this is thus making commercial real estate lesser
 attractive than residential real estate. Several vacant buildings
exemplify the challenge faced by investors in commercial properties .
 The maintenance cost is as high as Rs 20 psf (per square feet), even
if the building is vacant, and wastage in common areas is as high as 40 per cent.

Sunil Jindal, CEO of SVP builders, also says unlike residential realty,
commercial realty is only improving . Citing the example of his firm's
project, Ghaziabad-based Opulent Mall, he says more enquires are
pouring in for space now.

The good thing is some of the queries are serious and a few even
 translated into deals. "I expect that with an improvement in
 economy, Q2 results of most of the companies have surged,
hence, from now onwards, companies of all sizes will buy commercial space."

Rajeev Rai, vice-president (corporate) of Assotech Ltd, feels this
 is just the right time to buy commercial property.

FOCAL POINT

Economy is showing definite signs of improvement and the
affects of economic slowdown are disappearing, the commercial
 realty is bound to see better days A lot of office space is up for
grabs as many big-ticket companies have shifted from bigger to
smaller offices in the past few months after being hit hard by
slowdown
Source:ET