Indian commercial realty expands footprint, continues to defy global odds

Attracting investments from private equity firms even as the Western markets are witnessing a slowdown

Indian commercial real estate is attracting investments from private equity (PE) firms even as the Western markets are witnessing a slowdown.

US-based PE major Blackstone says the Indian market is different from others as local companies here are expanding and require more office space.

“This is probably one of the few markets in the world where we've seen rents grow and vacancies decline in the last 12 months. This is another sign of India's strength,” Blackstone’s president and chief operating officer (COO) Jon Wray said in an interaction with the media.

Indian developers said the availability of high-quality assets, reduced logistic costs due to upcoming multi-modal transit corridors, last mile connectivity boosting accessibility, a shift in manufacturing hubs to Indian markets due to the China-Plus One policy and stable political scenario are driving the growth velocity.

Conducive market dynamics, return-to-office phenomenon and high demand from banking, financial services and insurance (BFSI), pharma, healthcare, e-commerce, and lightweight engineering are also fuelling office space growth.

Blackstone, which has invested $30 billion in India's real estate so far, has become one of the largest landowners in the country with 120 million square feet of assets.

“We've got scale. We've had a lot of success and a lot of terrific partners. We have a differentiated strategy, where we're builders of businesses that help build India,” Wray said.

Wray said remote working coming out of the pandemic has been tough, particularly in the US and a few Western European cities.

“There's been a sharp decline in the value of office buildings, particularly the older ones, in some of the major US cities. New buildings will do better because there's going to be a shortage.

India is different — in Mumbai, companies are expanding and they need more office space,” he said.

Chief executive officers (CEOs) of Indian real estate companies said they are gearing up for rising demand by constructing new and green buildings.

Niranjan Hiranandani, Chairman of Hiranandani Group, said the performance of Indian commercial real estate, post-pandemic, appears to differ from Western economies.

“While the global commercial real estate market has encountered struggles in recent years, India has demonstrated steady growth and resilience, defying the downward trend seen in some Western economies. Indian commercial space has record high leasing in FY23, indicating a bullish gross domestic product (GDP) growth and conducive market dynamics are favouring its growth cycle northwards,” Hiranandani told this paper.

“As a company, we are bullish and betting high on commercial development in the coming years,” he added.

Sanjay Dutt, CEO of Tata Realty, said India is the largest remote work destination for global corporations, particularly from the US, which is leading to rising demand.

“The adversity in the US is an opportunity for India as more and more corporations will consider scaling their operations in India and have a good talent with far more efficiency,” Dutt said.

India will conservatively require around 400 million square feet of commercial real estate in the next 5-7 years, he added.