Real Estate Firms Moving Towards Office Over Residential Project
Real estate firms are shrinking their residential project portfolios and moving towards office projects as uncertainty looms over the housing sector owing to tepid sales and cash flow issues.
India’s largest property market Delhi-National Capital Region (NCR), which has been affected the worst in the ongoing slowdown, many developers are taking up office development, which has seen continued interest from both institutional and individual investors. Vacancy levels in places such as Bengaluru and NCR are low while demand for good office space remains high.
Noida-based developer Logix Group plans to finish constructing and handing over its four residential projects, and then focus on its commercial office projects. It has two new commercial projects, an information technology (IT) park and a retail-cum-office project, coming up.
Another NCR developer, Alpha Corp. Development Pvt. Ltd, which has a residential portfolio, is planning to build equal number of residential and commercial projects.
The residential sector has been deeply impacted by the ongoing slowdown, leading to significant distress in the market. Comparatively, commercial real estate has performed better, pushing residential developers to expand into office projects.
Bengaluru’s Century Real Estate Holdings Pvt. Ltd, is building a commercial office portfolio of around 7 million sq. ft to build an annuity base. It plans to launch a million sq. ft office project in March.
Managing director said the company will focus on building a new office platform along with affordable housing projects selectively and may bring in an investor.
Salarpuria Sattva Group, a Bengaluru-based developer of residential and office projects, plans to convert a 10-acre land in Yeshwantpur, which was earlier planned for a residential project, to an office project.
Pune’s Panchshil Realty will launch 5 million sq. ft office space across two projects with investor partner Blackstone Group Lp in 2018 with an investment of around Rs2,000 crore, said chairman.
The office sector has already consolidated towards a few larger developers, but it’s a good opportunity given steady rentals, better revenue quality and low vacancy levels are low. In NCR, there is a lot of appetite for new office developments due to high demand and low supply.
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