According to the latest RICS India Commercial Property Survey, despite the rising interest rates and inflation continuing to rem-ain relatively high, the mar-ket has shown considerable resilience. Over the last quarters, there had been an increase in demand from tenants, albeit at a slower rate than in the previous quarter. This is most pronounced in the office sector, altho-ugh given the extensive supply pipeline within the sec-tor; there might be a const-raint on further rental value growth.
During Q1 2011, India was placed 12th in the global rankings for rental expectations as demand has remained relatively strong and the existing market stock has been absorbed to an extent. Specifically within the office sector, demand is being accounted for by the BFSI and IT/ITeS sectors which continue to both buy and lease office property.
While India has improved its position over Poland, Czech Republic, Venezuela, South Korea and Mexico in comparison to Q4 2010, it continues to lag countries such as Peru, Hong Kong, China, Russia, Argentina and Brazil. In the global context, the rental outlook is now positive for the US market, albeit marginally, while sentiment in the UK, peripheral Europe, Japan and the UAE markets continues to deteriorate.
Capital value expectations have picked up quite sharply in comparison to the previous quarter, with India moving to be ranked 12th globally. This increase is most pronounced within the retail segment, as tenant enquiries and lease transactions within this sector have been seeing an uptick.
Significant increases in the outlook for capital values have also been witnessed in China and Hong Kong, despite renewed government measures aimed at cooling the property market in these countries. Through Q1 of 2011, capital values in India have surpassed those in Germany, Malaysia, Turkey and the US amongst others.
On account of the posit-ive capital value expecta-tions, an improvement has also been seen on the investment side when compared to the previous quarter when investment activities slowed down considerably due to the rising interest rates.
Consequently, India has moved from being ranked at 26 to 19, ahead of South Africa, Russia and most European nations in global investment transaction rankings within the commercial property sphere. However, the number of investment bidders per property is likely to decline as the effect of the continued interest rate hikes has a moderating effect on market activity.