Commercial real estate, which had been a ray of hope for developers over the last six months, has also succumbed to the pressure,
After acting as a beacon of hope for the real estate industry for the past six months, the commercial real estate segment has fallen prey to the taxing economic environment. A report by DTZ shows that over the last quarter, leasing activity in the segment has fallen 33% -- the first decline in one year. This is as per data from seven major cities -- Mumbai, Delhi, Chennai, Kolkata, Bangalore, Pune and Hyderabad.
Another study by CB Richard Ellis says transactions have fallen from 8 million square feet in the first quarter of this fiscal year, to 5 million square feet in the second quarter. At the same time, average supply has fallen a whopping 50%. Experts blame this sharp fall in supply on inadequate construction finance. They say companies are struggling to keep residential projects alive, and so are unable to deploy funds for commercial projects.
What's adding to the concern is the fact that despite a supply crunch, vacancy rates have risen to 23.6% and this is reflecting on developers' balance sheets.
For instance, Oberoi Realty 's recent results show a downtrend in earnings from its Commerz project for the first time in one year. Operating revenues have fallen from Rs 2,260 lakh in the first half of FY11 to Rs 2,179 lakh in the first half of FY12.
Experts point to the uncertain global and domestic economic conditions for this fall in leasing activity and say several companies, especially in the banking and financial sectors, have put expansion plans on hold. And till this picks up, sluggishness is likely to continue.
