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Developers should have a right mix of residential and commercial projects for healthy growth, say experts. A media report says developers are turning to office projects due to a prolonged slowdown in residential sales. "After 2008, many developers started focusing on residential projects due to global financial slowdown. Vacancies went up and rentals were down and they stopped building new commercial projects.
Today, vacancies are in single digits, rents are inching up and cap rates are down to 7 to 8 per cent, " says Shishir Baijal, chairman at Knight Frank India.Baijal believes developers should have a right mix of commercial and residential for healthy growth and steady cash flows. Housing sales fell by 35 per cent across eight major cities in the July-September quarter this year as demand slowdown continued in the property market, says research firm PropEquity. Housing sales stood at 22,699 units during the third quarter of 2017 in eight major cities as against 34,809 units in the previous quarter. The year 2017 witnessed a pan-India leasing volume of around 42.8 million sq ft, which is marginally up from 2016 absorption level (around 41.6 million sq ft in 2016). Bengaluru remained the frontrunner in office leasing, witnessing a record-breaking leasing of more than 15 million sq ft, occupying 36 per cent of market share followed by NCR (18 per cent), Mumbai (13 per cent), Chennai (11 per cent), Hyderabad (10 per cent), Pune (8 per cent) and Kolkata (2 per cent), says Colliers Research. Ajay Jain, Joint managing director at Sun Capital Advisors says that demand for commercial has increased n recent past since in last 5 to 7 years not much of commercial being developed. "These demands are largely for IT/ITES/BFSI segment. With too many developers moving for commercial, I forsee excess supply in a commercial over next 4 to 5 years," Jain explains.