Commercial rentals remain flat in Steel City

Commercial space rentals in Visakhapatnam have plateaued in recent months much to the disappointment of builders. The depressed prices are now forcing builders to convert commercial spaces into residential flats.

The fact that residential rentals have shot up by as much as 60 per cent in the last two years has helped. In school zones, there has been a 80-100 per cent rise in flat rentals.

The demand for residential flats continues unabated. With the availability of easy loans on low interest rates, several employees from public sector undertakings are now opting to buy flats. Owing to these reasons, the rentals for residential flats are on a high.

Two years back, a two-bedroom flat was available for rent between Rs 1,800 and Rs2,200, and a three-bedroom flat for between Rs 2,500 and 3,500. Now rentals have gone up to Rs 2,800-3,500 and Rs 4,000-6,000 respectively.

"In areas like Seethammadhara, Kirlampudi Layout, Beach Road and Dasapalla Hills, flat owners are demanding Rs 4,000 for a two-bedroom flat," K Subba Raju, the chairman of Visakhapatnam Builders Association, told Business Standard.

"At present, three-four lakh sqft of commercial space is vacant in the city. Due to lack of demand for commercial space, some builders are converting their commercial space into residential flats," Subba Raju said.

Even in the commercial complexes on arterial roads, businessmen prefer ground floor or first floor offices. The rentals for ground floors in commercial complexes were around Rs 15-20 per sqft two years back depending on the location, whereas it has gone up to Rs 20-25 per sqft now.

The rentals for the first floors, which were at Rs 10-12 per sqft two years back, are Rs 12-15 at present, while commercial space in the remaining floors are available at Rs 5-10 per sqft. Though the rentals are low, there are no takers, said Subba Raju.

"With no option left, some developers converted the commercial space in the second, third and fourth floors into residential flats," he added.

Construction of well-designed modern commercial complexes began a decade ago in the city with GK Towers building a commercial complex at Dwarakanagar area, a prime locality for commercial complexes.

The real estate prices then were in the range of Rs 2,000-3,000 per square yard. Thanks to GK Towers' success, there was a boom in commercial complexes.

At present, the price per square yard in Dwarakanagar area is Rs 15,000-18,000. All the arterial roads are full of commercial complexes. Nearly 50 commercial complexes came up in the Dwarakanagar area in the last five-six years.