Property rentals to remain steady in 2015 in India: RICS survey

RICS a global professional body that promotes standards and chartered qualification in real estate and construction is expecting real estate sector in India to remain positive despite mixed economic conditions according to Q2 RICS’ Global Commercial Property Monitor.

Further, the property rentals in 2015 are expected to yield positive growth especially in commercial property. RICS’ Global Commercial Property Monitor is a quarterly guide to the trends in the commercial property investment and occupier markets.

The occupier sentiment index edged up from two to eight suggesting a slight improvement in sentiment compared with Q1.This was driven by a further modest rise in occupier demand over the quarter. At a sector level, the latest results show offices continue to demonstrate greatest resilience with the demand indicator running ahead of the leasable space measure for the sixth successive quarter. This is reflected in rent expectations which are more upbeat in offices than other sectors.

The investment sentiment index did not see much change over the quarter. Investment enquiries continue to increase and at a similar pace to the early part of the year. The supply of property for sale also rose at pretty much the same rate. Despite this, expectations for capital values remain firmly in positive territory both at the short and medium term time horizons.

“Growth in investment demand is being outpaced by that of supply across South Africa, China and India. Notably amongst the emerging markets, India is the only country, which has recorded a marginal positive growth in both occupier and investment community,” said Sachin Sandhir, Global Managing Director, Emerging Business, RICS.

“The commercial real estate market in India seems to be showing signs of improvement. On account of positive capital value expectations, demand for quality office space seems to be holding ground and investors seem to be looking at adding stabilised assets to their portfolio. A careful watch on how much is being absorbed over the coming quarter; will determine the fate for the rest of the year.” said Devina Ghildial, MD, South Asia, RICS.

Three month rental expectations: Fresh demand to take up space is running pretty much in-line with new supply but despite this feedback on rents is still consistent with modest increases.

12 month rent expectations: Rent projections have also softened somewhat compared with the preceding quarter and more so looking out over the next three years. Nevertheless, the feedback is still consistent with higher rents with prime offices seeing the largest rises.

RICS members around the world remained positive about the commercial property market even though concerns persist about the sustainability of the upswing in the global economy.

With the ongoing economic troubles in Russia and Brazil, the feedback is still very cautious. Going forward, rents and the capital values are projected to fall but the expectations are not too negative as compared to Q1 Survey.

Meanwhile the strongest investment index readings were returned in Germany, UK and Japan. This was a result of accelerating growth in investment enquires driving up respondents expectations for near term capital value gains in the process, each of these markets recorded a firm increase in occupier demand and supporting upbeat projections of future rental growth.