The government’s pro-reform policies for the Indian real estate sector has received a thumbs-up from foreign investors as three major cities have emerged as preferred investment destinations in the Asia Pacific region. According to the Emerging Trends in Real Estate Asia Pacific 2018 report jointly published by PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI), Mumbai, Bengaluru, and New Delhi were ranked 12, 15 and 20 respectively as top investment cities.

Mumbai on investors’ horizon

 
The nation’s financial capital, Mumbai, continues to reap the rewards of a strong capital market. Absorption for commercial space has been strong, driven mainly by co-working space, manufacturing, and services companies. At around 17 percent, Mumbai’s office vacancy rate remains high, with a pipeline of 40 percent of the existing stock. However, Grade-A stock continues to remain low in the city and any new supply is quickly taken up resulting in strong rental growth.

Bengaluru emerges as top IT destination

 
The city has earned the reputation of being an international IT destination attracting major foreign companies to set up outsourced-service facilities. Foreign investors who had the foresight to buy income-producing assets in business parks have been successful. With India’s emerging Real Estate Investment Trust (REIT) sector, some of these commercial assets are likely to reap further profits. As a result of healthy tenant demand for Grade-A stock, the rental growth for BPO facilities has been recorded at 8 to 9 percent annually.

Delhi

 
According to experts, the city may have missed a chance to cash in on the surging commercial sector growth witnessed in the south. There has been an uptick in demand from IT companies, but office vacancies remain very high at 30 percent. Even as rentals continue to hold firm, Delhi has been a bit on the back foot when it comes to absorption.

India continues to grow as a major commercial real estate destination and provides 3 to 5 percent rental growth over a long period. With the rapid growth of the co-working sector, the country’s office space sector is set to change like never before. India also continues to attract institutional capital, offering a massive scale of the opportunity for investors.