The commercial real estate sector in Kolkata seems to be looking up, with an improved absorption rate, in the past few months, bringing some cheer in Bengal's gloomy industrial scenario.
Since the last quarter that ended on March 31, 2015, the rate of commercial space utilization has been 10-15% higher every month over the last year. This has come as a morale booster as the economy shows signs of revival.
Vacancy in commercial real estate (CRS) is still a high 22% in Kolkata but the real estate sector is hoping that the recent spurt will bring it down. Total absorption is expected to go up from 8 lakh square feet in 2014-15 to 12 lakh square feet in this fiscal.
Kolkata's vacancy rate is still better than Ahmedabad (32%). Pune, the second IT capital of India, has 19.5% unoccupied space. A study conducted by Ciril Network, an organization promoted by leading real estate consultants, reveals that even Mumbai and Delhi are not doing too well with 19% vacancy each.
IT capital Bangalore is by far the best with 13% vacant place, followed by Chennai at 16%.
On the rental front, Kolkata is in a better position, commanding an average price of Rs 35 to Rs 118 per sq ft. Pune, Hyderabad, Ahmedabad have lower rental rates.
Commenting on the Kolkata office market, the study says that it continually remains subdued for the second consecutive year as a result of policy level issues. "Due to weakening demand and policy stagnancy, many developers deferred their projects and only around 0.9 million sq ft of Grade A office space was added to the city. Most of the projects completed this year are located in Sector V/New Town. Around 15 million sq ft of office space is under development and will be available in next 2-3 years," the study says.
It pointed out that year 2015 is expected to be better if the city receives a policy boost. "The market will remain tenant favourable and rents may decline further in peripheral locations due to robust developments in the pipeline," it added. The major commercial real estate deals in the last four months include Accenture taking 77,000 sq ft in Unitech Infospace, Regus taking 17,000 sq ft in Park street Bandhan Bank taking 36,000 sq ft in Godrej Waterside.
On the "policy level issues", an official of Ciril said that the Urban Land Ceiling Act is restricting big real estate development. Besides, the state government's adverse stand on special economic zones is affecting IT real estate demand to some extent. Property tax rate in Kolkata Municipal Corporation area is also on the higher side, he said.
Pawan Agarwal of N K Realtors, who is regional director of Ciril Networks, feels that the low occupancy in commercial real estate is a national phenomenon. "There is vacancy in commercial real estate in other metro cities as well. Things are looking up now," he said. Ravindar Chamaria, chairman of Infinity Group, says things are already improving and 2015 would be a fruitful year for Kolkata. Rishi Jain, director of Jain Group, said the service sector in Bengal is doing well but the off-take level in Kolkata is still low.