India’s office sector witnesses a robust recovery in Q1 of 2022

V Nagarajan

India’s office sector continued to witness a robust recovery in the first quarter of 2022, as leasing activity grew by 97 per cent Y-o-Y to touch 11.4 million sqft.

On a quarterly basis, absorption declined slightly by 25 per cent. Bengaluru, Chennai and Delhi-NCR together accounted for two-thirds of the transaction activity during the quarter, according to India office mart survey by CBRE.

The robust recovery in leasing was also reflected in Google mobility trends – with workplace visitors in India rising by 25.4 per cent in March 2022 as compared to the median value of the baseline – a 5-week period from January 3 to February 6, 2020.

Supply witnessed in Q1 was around 9.4 million sqft., a slight dip of around 11 per cent y-o-y and 41 per cent q-o-q respectively.

Bengaluru, Hyderabad and Chennai led supply addition during the quarter, accounting for a cumulative share of 70 per cent.

The non-SEZ segment dominated development completions with a share of 83 per cent, which went up from 69 per cent in the previous quarter.

On a quarterly basis, technology corporates drove leasing with a share of 34 per cent followed by BFSI firms (17 per cent), flexibile space operators (13 per cent), engineering and manufacturing (12 per cent) and research, consulting and analytics (11 per cent) companies.

Technology corporate and research, consulting and analytics firms witnessed a rise in their cumulative share of overall absorption from 27 per cent to about 45 per cent on a q-o-q basis.

Office space take-up was driven by small (less than 10,000 sqft) to medium-sized (10,000-50,000 sqft) transactions with a share of 84 per cent, increasing from 82 per cent in Q4 2021.

The share of large-sized deals (more than 100,000 sqft) remained similar to the previous quarter at about 7 per cent while the share of medium to large-sized (more than 10,000 sqft) deals witnessed a rise.

Pune and Chennai, followed by Delhi-NCR and Bengaluru, dominated large-sized deal closures, while a few such deals were also reported in Hyderabad.

A rental increase of approximately 1-4 per cent q-o-q was recorded in select micro-markets in two cities such as Bengaluru and Mumbai.

Moreover, driven by growth in select premium assets, SBD in Kharadi in Pune and GST road in Chennai recorded a rental rise of approximately 7-9 per cent q-o-q.

As per the latest budget, the current SEZ Act would be replaced with a new legislation for the development of enterprise and service hubs.

It would cover the existing industrial enclaves and enhance the competitiveness of exports, thus resulting in an anticipated increase in activity in SEZs across cities.

Increase in rents, especially for quality, tech-enhanced, amenitised and well-located assets along with select core micro-markets which would display low vacancy levels across cities are anticipated in the coming quarters.

I have let out my small land on lease to a vendor for over 15 years.

He is now refusing to vacate and citing his long stay as the reason and wants a place in the new building.

What is the legal course of action available to me? Muthuvel, Sharjah.

This is normally what happens when a tenant is allowed to continue for a longer period.  But he cannot seek any special protection for his longer stay.  You could invoke on any one of the available grounds under the Rent Control Act to evict the tenant.

Reconstruction is a valid ground to proceed against the tenant and it is not necessary that you should offer him a place in the reconstructed area.

My family owns vacant land in Bengaluru. We are planning to enter into JV with a developer for development of affordable housing? Does the transfer of land attract GST and what is the rate of GST for affordable housing? Eashwarappa, Dubai.

As per para 5 of Schedule III of CGST Act, 2017, sale of land is neither supply of goods nor supply of service.  You are not liable to pay GST on transfer of land to the developer for affordable housing development under joint venture.  The rate of GST for affordable housing is 1 per cent (no ITC) effective April 1, 2019.

Affordable housing project means a residential house/ flat of carpet area of 90 sqm in non-metropolitan cities and 60 sqm in case of metropolitan cities, of which value does not exceed Rs4.5 million.