Commercial realty values, rentals dip in Mumbai

Capital value and real estate rentals of commercial property in Mumbai, New Delhi and Bangalore have declined substantially by around 15-30 per cent in 2003 and are expected to remain under pressure in 2004.

A year-end review done by global real estate consultants Cushman & Wakefield says that prime rentals in the office districts in these cities have been under pressure throughout the year despite a substantial increase in demand for realty.

Chanakya Chakravarti, executive director at Cushman & Wakefield India, told Business Standard , "The primary reason for declining rentals and capital value of the prime locations is because of the satellite towns coming up. Because of the spread in the commercial landscape, the supply has outgrown the demand."

While rents in office districts in Mumbai such as Nariman Point has seen a decline of around Rs 30 per square foot to Rs 110 per square foot, a dip of over 20 per cent, rentals in Andheri-Kurla have nearly halved in the last year to Rs 35-40 per square foot.

The prime capital value in Nariman Point has also come down to Rs 11,000 per square foot from Rs 13,000 per square foot, while in Bandra-Kurla Complex capital values are hovering around Rs 7,000 per square foot from Rs 9,000 per square foot.

"The Bandra-Kurla Complex to a larger extent and Nariman

Point are areas that could see a further correction in terms of rentals as well as capital values," Chakravarti said.

In the National Capital Region (NCR), rentals in the prime central business districts have fallen by 4 per cent to Rs 91 per square foot in the last six months, while rentals in south Delhi have declined by 14 per cent to Rs 87 per square foot.

The study says that with expected new supply during 2004, prices are expected to remain soft over the next 2-3 years in the NCR.

Meanwhile, Bangalore also experienced a correction in rentals in its prime office locations.

Commercial rentals in the central business district at MG Road came down to Rs 42 per square foot, a dip of 16 per cent over prices in 2002, while off this area, rentals plunged 22 per cent to Rs 37 per square foot.