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‘Slowdown now, but real estate will bounce back’

Submitted by on Sunday, 12 October 2008No Comment

Despite the expected slowdown in the demand for office space, international realty consultants Cushman & Wakefield predicts that the demand for commercial office space will pick up in India in another two to three years.

During the next five years the demand is expected to be around 243 million square feet. All India office space absorption in 2007 in the seven major cities (Bangalore, National Capital Region — NCR, Chennai, Mumbai, Pune, Hyderabad and Kolkata) was around 33 million square feet, supply was 45 million square feet.

Commercial office space demand in the country is essentially driven by the performance of the economy, infrastructure developments, inherent talent pool and state level policies to encourage investment.

In sync with corporates’ expansion plans, these demand dynamics lead to a few cities continuing to remain the preferred destination with a buoyant demand in the country.

Cushman & Wakefield, in its latest GRI India Real Estate Investment report 2008 said, “The global economic slowdown is definitely impacting the real estate sector across the world and India alike. Fortunately, this slowdown is unlikely to last beyond the next 2- 3 years.”

“In the long-term the strong demand for real estate in India remain intact and will probably see us through another real estate cycle once the market finds its own level by responding to these short — to – mid-term global and domestic factors,” the report added.

Of the 243 million square feet projected, Bangalore leads the table at 51 million square feet which is mainly led by the IT/ ITeS sector. NCR follows with 48 million square feet, then Chennai at 33 million square feet, Mumbai 23 million square feet, Pune and Hyderabad 21 million square feet each, and Kolkata seven million square feet.

According to Anurag Mathur and Sanjay Dutt, joint managing directors, India, Cushman and Wakefield, “A dynamic workforce, liberalised economy, robust demand for real estate across sectors are key factors that will make the Indian market in the coming years more reliable for investment especially in the real estate sector.”

Chennai, the other major city in south, although lags in terms of absolute demand, the city is likely to emerge as a promising location for real estate developments due to large skilled workforce and huge floating population.

“The thriving services and manufacturing sectors will provide the much-needed momentum for the same. The city is also expected to witness robust demand of nearly 33 million square feet of office commercial space by 2012,” the report said.

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