Colliers International’s latest report- Asia Market snapshot - Q1 2018 highlights that the first quarter of 2018 proved unsettled, with concerns about a global trade war and heightened volatility pressuring global markets. Asia’s property sector remains buoyant overall, supported by the region’s robust growth and forward looking government policies. As per Colliers Research, massive infrastructure investments in countries such as India, Japan, China and Indonesia will continue to create opportunities for investors, while major markets like Hong Kong and Singapore are likely to benefit from the perception of property as a relatively safe haven in uncertain times. In India, while the residential market is in attempts to regain momentum, commercial and warehousing sectors likely to flourish as the key sectors to watch for over 2018.
“With the aftereffects of RERA and GST settling in, we are starting to see the initial signs of a gradual revival in the residential sector. A gradual uptick is being witnessed even in the sales numbers of some of the developers, who have a good track record of delivery over the past few years. Demand is primarily being seen from end-users only. Grade A Commercial, Quality retail (Mall) space and Warehousing continues to evince strong interest” says Gagan Randev, National Director, Capital Markets and Investment Services at Colliers International India.
Indian residential market set for slow recovery over 2018
After a year of slowdown in 2017, with the impact of the Real Estate (Regulation and Development) Act (RERA) and Goods and Service Tax (GST) in the past 6 to 12 months, India’s residential real estate market is in the phase of recovery and stabilization in 2018.
Although, the release of fresh inventories has slowed, with only 30,000 units launched across major cities in the country, demand for homes, especially in the ready-to move segment for end-users has gained considerable pace. The demand upswing for ready-to-move-in projects is majorly due to benefits of GST and risk-free possession”, says Surabhi Arora, Senior Associate Director, Research at Colliers International India.
Affordable housing will gain momentum while mid-range and luxury housing likely to remain lull
As per Colliers Research, absorption of affordable housing projects should further gain momentum over 2018 as an impact of earlier announced policies by the government such as infrastructure status to the segment, establishment of Affordable Housing Fund (AHF) and reduced GST to 8% from 12% for under-construction, affordable and low-cost housing to ensure ‘Housing for all by 2022’. With RERA scheduled for full implementation this year, developers are expected to focus on delivering ongoing projects in time and avoid penalties for non-compliance. Thereby, we expect that the demand for mid-range and luxury-housing projects should continue to experience a lull over 2018 as the developers focus is likely to stay on project completions.
Office market in India to see stronger demand
Commercial real estate leasing segment recorded 11.0 million sq ft of pan-Indian gross absorption in Q1 2018, representing an 18% YoY rise in demand. On the supply side, the office market segment is becoming more organized with developers being strategic in their developments plans and upgrading their office portfolios. About 9.0 million sq ft of new Grade A office space reached completions across major cities in Q1 2018. Consistent expansion of technology companies, supportive policy initiatives such as Make in India, Startup India, thrust for logistics industry and growing interests from various industry occupiers like manufacturing and coworking should upkeep demand for office spaces in medium-to-long term.
Active investments likely in commercial real estate
As per Colliers Research, the sustained demand in commercial office segment and the anticipation on Real Estate Investment Trust (REIT) in turn, should increase investor’s appetite for commercial assets over 2018. Few of the key deals in Q1 2018 include purchase of IDBI Bank’s seven-storey building by Securities and Exchange Board of India (SEBI) in Mumbai’s Bandra Kurla Complex and Indiabulls Dual Advantage Commercial Assets Fund purchase of a fully leased commercial tower of about 0.24 million sq ft in Skyview Corporate Park, Gurugram in partnership with Interglobe Real Estate Ventures Ltd. Also, Sanjay Ghodawat Enterprises concluded the sale of its fully leased building Pinehurst, measuring 0.25 million sq ft, in Bangalore’s Embassy GolfLinks Business Park to Xander Funds. Colliers International (India) acted as exclusive advisors to the client for this transaction.
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