Modi Sarkaar may bring reforms in realty sector, but expect rents to rise soon

New Delhi: Rentals for office and retailspaces are expected to increase in the coming quarters on theback of rising demand, according to a survey by RICS.

Royal Institution of Chartered Surveyors, a global bodyfor setting standards in the property sector, said in itslatest report that the demand for office and retail spacesrose during the January-March quarter.“There are positive indicators in the market. The occupierdemand for the first time since 2011 has outpaced the rise inavailability (though marginally). This means that there ishealthy demand for quality space in the market,” RICS SouthAsia Managing Director Sachin Sandhir said in a statement.

Rents have bottomed out over the past few quarters, hesaid, adding that they are expected to rise from these levels.“Driven by demand across office and retail segments, rentsacross commercial real estate are expected to witness a hikeover the coming quarters across all segments on accountimproving economic environment,” RICS said in India CommercialSurvey for first quarter of 2014.

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The report said that capital values are expected to remainbroadly stable in the coming quarter.

“The Indian economy is gradually recovering and showingsigns of stability. The recent monetary policy measuresundertaken by the Reserve Bank of India (RBI) has improved thecourse of recovery. As widely perceived, it is likely that thestable government at the centre will help the industry tobring back reforms for the real estate sector,” RICS said.

According to the survey results, the Occupier SentimentIndex (OSI) edged into fairly neutral territory at +7following the previous value of -13, ending a run of sevenconsecutive negative readings. However, demand for industrialspace fell during the period.

“It is expected that the newly elected government willbring reforms for the sector, which is grappling with problemssuch as regulatory bottlenecks, rise in interest rates,limited availability of quality space and inflation,” Sandhirsaid.

While rents are expected to rise, there are expectationsin the market that transaction levels will increase.In the investment market, the Investment Sentiment Indexdropped a touch to (-)8, from last quarters reading of (-)1.“Investor interest diverged between sectors, with the
office segment registering material growth, while enquiriesfell in both the retail and industrial areas of the market,“the report said.

Despite drop in investor sentiment, RICS survey said thetransaction levels are projected to increase over the nextthree months with the office sector looking set to outperformin the near term.

PTI