Office leasing by BFSI surge on rising demand in H1 of 2023

V Nagarajan

Foundational shifts across the banking and finance sector are presently underway, with a transformative focus on digital, workforce and Environment, Social and Governance (ESG) priorities, according to Colliers. Having invested significantly in technology, people and workplaces, banking and finance companies today find themselves at an inflection point.

Today, as banks and financial services firms rethink their future with AI and next-gen technologies, integrating a diverse workforce with new ways of working, real estate plays a massive role in influencing positive business outcomes. It holds the key to powering the industry’s digital, workforce and ESG goals. Colliers has found physical offices have a profound impact: particularly on an organisation’s digital transformation journey.

BFSI (Banking, financial services and insurance) sector has seen a steady rise in demand in the last two years, with its share in total leasing regaining to 15% in H1 2023 from the pandemic lows. The resurgence in demand is fuelled by a healthy space take up by domestic and select global banks and financial institutions, supported by a higher rate of return to office. Domestic banks, insurance companies and financial institutions have witnessed an uptick in demand backed by improved economic outlook and heightened domestic demand.

Interestingly, a majority of the large BFSI occupiers continue to prefer conventional office spaces and work mechanisms to suit their operational and technical requirements, keeping the demand for real estate space buoyant.

Offices provide an absolute opportunity to ensure customer experience along with employee satisfaction and productivity, collectively contributing to overall business performance while also addressing climate action goals.

Hybrid or remote work is adding new dimensions to the location strategy, with portfolios expanding and diversifying to include ‘hub’ and digital campus-type delivery models, as more occupiers are now exploring suburban and peripheral locations. There are also massive shifts in the ways office lease transactions are done today. For instance, Colliers’ APAC research and client interactions indicate that more occupiers are exploring shorter lease terms and flexible space to drive efficiency and construct diversified portfolios that cater to different ways of working.

According to Colliers, the Asia Pacific region has possibly the most exciting 12 months ahead, globally, both in terms of money coming into Asia Pacific and Asian money looking to be deployed into other regions.

Mumbai continued to drive BFSI leasing activity, grabbing one of every 3 deals during last 18 months (2022-H1 2023). During this period under review, the city accounted for approximately 31% of the total leasing by BSFI sector across the top six cities in India, with absorption of over 3.2 million sq feet. While Mumbai continues to attract higher BFSI demand, Bengaluru has also seen rise in space take up by BFSI occupiers in the last 4-5 years, as large global BFSI occupiers are setting up their technology and back-office operations in the city owing to its huge digital talent pool & robust infrastructure.

In H1 2023, Bengaluru surpassed Mumbai in total BFSI leasing, accounting for 34% of the total leasing in the sector.

As digitisation remains core to financial services, BFSI players will continue to explore larger markets with presence of tech-hubs such as Bengaluru, Delhi-NCR, Hyderabad, Chennai and Pune.

Tier II markets are also likely to witness heightened demand as occupiers look to setup and expand their back-office operations in these locations owing to improving infrastructure, availability of digital talent pool and favourable real estate costs.

I intend selling a few properties in India and repatriate to Gulf for reinvestment in overseas properties.  What is the quantum allowed for repatriation? Please clarify. Damodar Gothirarekar, Sharjah.

The amount of sale proceeds of immovable property allowed for repatriation should not exceed (a) the amount paid for the acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in FCNR account or (b) the foreign currency equivalent as on the date of payment of the amount paid where such payment was made from the funds held in NRE account for acquisition of the property.  In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties. The balance amount, if any, can be credited only to NRO account and can be repatriated up to USD one million per financial year.

My family in India has formed a trust for charitable purposes.  It is receiving income out of properties held in cities.  Is it taxable? Sharan Gouda, Dubai.

No. Section 11 of the Income Tax Act exempts income derived from property held for charitable purposes, subject to certain conditions and limitations. The intention of the government is to ensure efficient utilisation of available resources for public welfare.  It is necessary to ensure proper accountability.