A slowdown in India’s economy has decreased demand for commercial real estate and caused cash for developments to dry up, leading many developers to delay or abandon projects in recent months. For more information, read the following article from Property Wire.
Mumbai and Delhi, India’s leading commercial property markets are unlikely to see any major increase in supply in the next couple of years, as developers either abandon or delay projects due to severe lack of cash.
Out of 212 million square feet grade-A office space planned in Delhi, Mumbai, Bangalore, Kolkata, Pune and Chennai, it is predicted that only 88 million square feet is likely to be completed by 2010, according to industry officials.
The demand-supply scenario in these cities would remain under pressure, they added, and average absorption across these six cities is also set to reach its lowest point, as it will fall by nearly 60 percent during the next five to six quarters.
“Developers will be forced to cut back new construction plans significantly given the low demand for office space due to overall slowdown of the economy,” said international property consultant DTZ in a recent report on office space supply.
Projects, that were announced and which are still in planning stage, will most certainly be shelved, added the report.
“Many under construction projects will undergo financial stress or will be stranded due to lack of finances for completion, until there is an improvement in market conditions,” said Anshul Jain, CEO (India) at DTZ International.
Mumbai, one of the most expensive commercial markets in the world, had been expected to add another 34 million square feet over the next two years. However, with the current slowdown it is now highly unlikely that all this supply will be realised before 2010.
Industry analysts believe only 16 million square feet will be added into the Mumbai commercial market by the end of 2010.
In the Delhi a total of 67 million square feet of new supply of office space has been scheduled to hit the market by the end of 2010. But, industry analysts are now predicting that only 27.3 million square feet is likely to come to the market by 2010.
“The demand-supply scenario in the retail segment will be under pressure since many malls which were expected to come, have been converted into commercial or residential properties. The demand-supply situation may not, however, be as bad as other commercial properties,” said Annul Purim of Jones Lang LaSalle Meghan.
This article has been reposted from Property Wire. View the article on Property Wire’s international real estate news website here.