India ranked 12th in rental expectations: RICS survey

Over the last quarter, there has been an increase in demand from tenants, albeit at a slower rate than in the previous quarter. This is most pronounced for the office sector, although given the extensive supply pipeline within the sector; there might be a constraint on further rental value growth.  

During Q1 2011, India was placed 12th in the global rankings for rental expectations, as demand has remained relatively strong and existing market stock has been absorbed to some extent. Specifically within the office sector demand is being accounted for by the BFSI and IT/ITES sectors which continue to both buy and lease office property.

While India has improved its position over Poland, Czech Republic, Venezuela, South Korea and Mexico in comparison to Q4 2010, it continues to lag behind countries such as Peru, Hong Kong, China, Russia, Argentina and Brazil.

In the global context, the rental outlook is now positive for the US market, albeit marginally, while sentiment in the UK, peripheral Europe, Japan and UAE markets continues to deteriorate.

Capital value expectations have also picked up quite sharply in comparison to the previous quarter, with India moving to be ranked 12th globally. This increase is most pronounced within the retail segment.  

Significant increases in the outlook for capital values have also been witnessed in China and Hong Kong, despite renewed government measures aimed at cooling the property market in these countries. Through Q1 2011, capital values in India have surpassed those in Germany, Malaysia, Turkey and the US amongst others.

On account of the positive capital value expectations, an improvement has also been seen on the investment side, in comparison to the previous quarter when investment activity slowed down considerably due to rising interest rates. Consequently, India has moved from being ranked at 26 to 19, ahead of South Africa, Russia and most European nations in global investment transaction rankings within the commercial property sphere.