India’s office absorption declined by 30 per cent in Q1 of this year

V Nagarajan

India’s net absorption of office spaces in Q1 2020 witnessed a decline of 30 per cent from the peak observed in Q1, 2019. IT-ITeS (56 per cent) as well as co-working (13 per cent) occupiers drove leasing activity during the first quarter.

Furthermore, construction activity and the process of obtaining requisite approvals from the government also slowed down in the beginning of March, in line with growing concerns of the impact of COVID-19.

“New completions were recorded at 8.6 million sq ft in the first quarter of 2020, a 40 per cent drop as compared to the same period last year,” according to JLL survey.

According to Anarock survey, US-based companies account for 45 per cent of office occupiers, followed by India-based companies at 30 per cent. Incidentally, countries within the European Union - one of the worst affected - contribute 10 per cent of the overall leasing in the Indian office market. However, the current testing time will compel many Indian operators to explore various options that can be leveraged in the future to optimise cost.

Net absorptions in 2020 to drop by 17 per cent to 34 per cent from the Pre COVID-19 estimates.

Large occupiers who have not been able to operate to their full strength during the pandemic may factor this period while renewing and would negotiate the rentals.

Consolidation plans may be to move to peripheral locations to contain the rental pay-outs.

Rentals are likely to come under pressure, as renewals and new leases are likely to be negotiated intensely, the survey reveals.

In yet another report, Colliers India says that across the seven major Indian cities, IT-BPM sector continued to dominate leasing activity in quarter 1, 2020, accounting for 55 per cent share while flexible workspace operators accounted for about 15 per cent.

Overall, projections for the current year are estimated at 45-50 million sqft, lower than 2019.

Over the next few months, leasing is expected to be mainly driven by renewals and consolidation activity. With fresh take up of spaces likely to be limited, landlords might have to sit on locked in capital (completed buildings) for a relatively longer time period. Occupiers have also begun renegotiating their lease contracts for lower rents, an extension of rent-free period as well as waiver of lock-in periods.

Short-term liquidity concerns might arise for developers/landlords with occupiers seeking concessions, according to JLL survey.

Co-working operators, who are more exposed to short-term contracts, may face greater problems if members decide not to renew, while operators with more secured medium-term and long-term contracts will be less exposed.

Business continuity plans and remote working strategies have been successful. Hence, future demand from occupiers is likely to take into account the need for flexible workspace.

I am investing in a property from a person who bought from a family of four people. It is not clear whether all of them have agreed to the sale to the previous owner. How to protect our interest while investing in such options legally? Prakash Chella, Sharjah.

Assuming that the first owner obtains possession through a will or intestate, you should ensure that the family members have registered with the concerned sub-registrar of assurances and that the property has been legally transferred. It is better to conduct a legal due diligence with respect to the title held by the family members. Also issue a public notice to verify if any third party has interest and obtain indemnity in the event of a claim from the seller.

As regards sale of the property from the person who bought it from the family, it will be treated as a normal sale transaction through execution and registration of sale deed. This will protect your interest in the event of any future challenges.

I have invested in a project in Kochi which has not been completed for the past five years. Can NRIs approach RERA authorities to resolve the issue? Suresh Menon, Dubai.

Yes. Like residents, you can approach any regulator including RERA authorities, to seek relief.

 I am due to receive a commercial property by way of gift from my family members in Indore. Are there any restrictions to get it? Please clarify. Vinod Bangera, Dubai.

You can receive the commercial property by way of gift from your relative and there are no restrictions if it is from a close relative. There will be no tax implication. It will be taxed in the hands of the receiver only if it is not from a close relative. In the latter case, based on the sale price or stamp duty value, tax will have to be paid on the higher of the two values.