Indian Commercial Real Estate Property Market - Is it the Next Bubble?

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Indian Commercial Real Estate Property Market - Is it the Next Bubble?

Indian Commercial Real Estate Property Market - Transforming and Growing. Can it sustain this growth? Some insights explored here.

The Macro Commercial Property Barometer continues its positive trend. The Barometer, which gauges macro economic conditions and their impact on commercial property investment, has been positive since last year on both the quarterly and annual basis.

Regarding the outlook, factors that are expected to positively impact commercial property investments include benign broad inflation, soaring stock markets, positive economic growth, a satisfactory building inflation range, somewhat stable political scenario, and resulting business confidence. Factors that may negatively impact the sector include high levels of development activity, an up tick in bond yields as well as the prime interest rate, a slightly weakening of the exchange rate, and a lower level of consumer confidence.

Aside from issues around market conditions and structural adjustments, which by in large remain in favour for the sector in the medium term, the barometer suggests that the broad macro fundamentals will continue to support commercial property.

Direct commercial property is considered to have some upside, if not because of solid fundamentals driving income and capital growth, then for reasons related to globalization where Indian property is expected to take a greater cue from the international investment markets, leading to both lower direct capitalization rates and listed property yields.

Of course India does represent a slightly different risk profile and our property inflation and escalation parameters are still adapting, so it is not a foregone conclusion that we can brazenly compare our market to that of the premier developed economies. Nevertheless this is food for thought and suggests that there may well be scope for further structural adjustments to property yields and therefore capital growth. Various feature stories that we carry further below, provide insight into why yields are dropping and why this is a good thing.

Keep reading for more insights and analysis or Commercial Real Estate Property Market of India.