In the prevailing economic environs, wherein the demand for loans from corporate is shrinking, commercial real estate and construction are outperforming at nearly triple the average despite slowing real estate market. The hopes of economic recovery are not on expected line but the overall demand for loans from companies and builders is lapping up funds to complete current projects so as to be quick and ready when the demand picks up. As per available stats, loans to commercial real estate rose 17.6% on year on year basis in August to Rs 1.6 lakh-cr when the overall loan growth barely grew by 10%, according to the latest Reserve Bank of India data. Simultaneously, loan to the construction sector grew 31% to Rs 70,600cr.
It is worth mentioning here that the reflection of the current trends indicated the compulsion on developers to complete the project and deliver on their commitments, chairman, Praron Consultancy (India) and former chairman of Knight Frank in India, Pranay Vakil, said adding that all those developers who are confident of tying up lease rental agreements at their commercial projects are going ahead with the projects. Current vacancy level within the Mumbai office market is at 23%, the highest compared to top 15 global cities. In the residential segment, too, unsold inventory across top six cities in India, including under-construction and completed residential properties, currently stands at around 760,000 apartments as on June end as against nearly 734,000 apartments in the previous quarter. But some say that the property market may be frothy, but the commercial estate is affordable even though many malls are becoming ghost complexes as booming e-commerce makes many businesses unviable. India is likely to witness an infrastructure boom, providing real estate with an advantageous edge as an investment vehicle, multinational property consultant firm Jones Lang LaSalle said in a research report. Investments, including FDI in the real estate sector are bound to give high yields provided the projects are timely and properly executed, said another analyst.