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Commercial real estate market sees sharp rebound in September quarter

DLF recorded over 98 per cent collection in office rentals

The commercial real estate market is coming back to life after the severe blow it received during the prolonged nationwide lockdown. With offices opening slowly and renewed demand from growing sectors like e-commerce, developers are beginning to register commercial rentals and leasing fees again.

Sample this: Real estate major DLF reported over 98 per cent recovery in office rentals in the July-September quarter. It raked in Rs 720 crore in total, nine per cent higher than the previous quarter, with Rs 670 crore from office rentals. During the quarter, it signed a pre-leasing agreement of 770,000 square feet with Standard Chartered GBS in Chennai for setting up its largest campus globally. And, with the addition of Cyber Park in Gurugram, it now expects up to Rs 400 crore in additional revenue.

To further fuel its investment plans, DLF has secured its largest funding of Rs 2,400 crore from SBI.

While the long-term impact of ‘work from home’ is yet to be assessed, spacing out of existing offices will help its performance, the management informed DLF’s investors. In the retail space, all malls in key metros, except in Mumbai, are operational now. While retail footfall ranges between 35-40 per cent, per capita spending has gone up significantly.

According to Ashok Tyagi, director of DLF, the firm is now gearing up to launch a real estate investment trust (REIT) for the rental business. Its rental arm DLF Cyber City Developers is structuring its REIT in a 2:1 partnership with Singapore’s sovereign fund GIC by early 2022.

Others, like Uddhav Poddar, managing director of Bhumika Group, said the recovery in the commercial real estate market has been beyond expectations. The group, which has two major projects in Udaipur, witnessed rentals shoot up to 75 per cent of pre-Covid levels by September. “During the initial months, activities in the leasing market came to a standstill just like in construction. But as cities opened up from June, the recovery has been steady,” said Poddar.

“The markets in Noida and Ghaziabad were growing faster before the pandemic, as real estate is cheaper and potential for this region to become an alternative to Gurugram is very high. Since work for the Jewar Airport (on Yamuna Expressway) has begun, both land acquisition and construction activities have picked pace. While initial restrictions had hampered business, most of our projects have went back to pre-Covid levels,” said Manoj Gaur, MD of Gaur Group.

According to Niranjan Hiranandani, president, Assocham and Naredco, the Reserve Bank of India’s decision to open the window for restructuring loans to companies, individuals and MSMEs under mandated safeguards has been a big boost for the liquidity-strapped industry. A flexible repayment scheme under the new resolution framework will bring much-needed relief to developers and further help them in resuming operations smoothly.

While mid-segment hotels and leisure segments, which form a large chunk of rentals for smaller developers, continues to suffer. Mandeep Lamba, president-South Asia, HVS Anarock, expects them to lead the recovery in the overall hospitality sector in the coming quarters.

According to experts, some of the transformations that offices now need to undergo will improve prospects for developers. Start-ups that are coming up due to the disruptions will create more demand. Further, demand from leaders in the e-commerce and data centre markets continues to grow with heightened demand for online purchases, cloud computing and over-the-top segments. While e-commerce giant Amazon added a 1.2 million sq ft fulfilment centre in October, Flipkart is planning to build an additional centre in Haryana.


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