Rentals and capital value of office space witnessed a further drop during the January-March quarter in metros like Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.The financial and IT sectors, which have been hit hard by the slump, are postponing their capital expenses and giving up on excess space.
The adverse supply-demand crunch, high interest rates and low mismatch and non-availability of confidence in the economic outlook financing options, has impacted the realty sector hard in the form of substantial slowdown in construction in the last few months of 2008. Most new projects remain on paper. While not ruling out the scope of further correction in the coming quarters, the report said that the prospects of any sharp decline are unlikely. Transactions are expected to pick up in the major cities in the medium to long-term period.
With the IT sector facing a slump, the peripheral market of Gurgaon continues to be slow. This quarter witnessed an increase in the supply (around 0.25 million sq ft) of furnished space and availability of sub-lease options In Noida the current vacancy rate is around 25% to 30%.
Mumbai has also seen a southward trend in rentals across all micro markets. The central business district of Nariman Point has witnessed a significant correction in rentals over the last 6-9 months with additional secondary stock added to the micro market, taking the vacancy rate to around 15%.
Despite the general lack of demand, extended business district - Lower Parel and Worli has witnessed a revival of construction activity in many of the projects that were earlier stalled.
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