Commercial or Residential Real Estate – Which is going to be a winner this year?

As the Indian economy is speculated to rise at above 7% over the next three years, the commercial real estate should stay full-bodied with sustained demand from occupiers in the current year as well.

The year 2017 was a year of big change for the real estate industry. Owing to demonetization, the country’s economy came under heavy pressure in the first quarter of the last year. The real estate market was no different as it got affected heavily due to this paradigm shift. The entire residential sector witnessed lukewarm sales, almost no new launches and even cancellation of units booked by buyers. Land sales becamestagnant with barely any deals happening in the first quarter of the year.

As things started to revive, RERA and GST were rolled out, which again lead to a bit of slowdown. Both buyers as well as developers decided to wait for the decisive set of rules to be effective before moving further. RERA was a big block to sales since most developers spent quite a bit of time getting all the legal documentation and paperwork finished to put things in place. Particularly in states like Maharashtra, where the state regulatory bodies were strong in getting things moving on time, developers delayed sales in projects till they got themselves registered.

Business cycles were affected adversely last year with buyers holding back purchases and developers diminishing new launches – therefore, affecting sales which saw a major slowdown in most of the cities. By the end of the year, the three-tonged result of demonetization, RERA and GST started giving a new look to the domain. It can be defined as a face with revised standards of delivery, transparency and accountability.

On the other side, those with a majorrevelation to commercial assets navigated through plunging residential sales. Last year witnessedgreat demand and rental rates for the office space in a number of cities, specifically Pune, Hyderabad and Bangalore. The nation saw a pan-India leasing capacity of close to 42.8 million sqft, slightly up from the year 2016. Bangalore is still the front runner with a record-breaking leasing volume of above 15 million sq ft.

As the Indian economy slated to rise at above 7% over the next three years, the commercial real estate is set to remain robust with constant demand from inhabitants in the year 2018 as well. A number of business firms have begunassessing their real estate strategies and monetizing assets. Companies are stiffening up their relocation and consolidation strategies and tenants are booking large office spaces at promising lease terms to privet against rise in rents.

In the residential sector, new source is expected to be limited in 2018. Implementation of RERA should given affirmative gush as it promises to weed out fly-by night operators from the market. The sector is already witnessing and is expected to get a major consolidation as major developers would sell their assets in order to finish the running projects or save on debt. More joint ventures and joint developments will emerge out with some of the financially distraught developers being taken over by the big firms, thus giving the sector a new league of competitors.

While the commercial real estate will be able to hold ground, it is not firm to witness a transformational retrieval of the residential sector in the year 2018. As the operational crescendos of the markets have seen an extensive change, growth from here onwards shall be driven majorly through sturdier fundamentals and is expected to be more maintainable.