India’s top office markets witness 4-8 per cent yearly surge in rentals

V Nagarajan

Strong office market performance in India has been fueled by robust economic growth and renewed occupier confidence, according to Colliers’ latest report on Expert Insights/Asia Pacific Office Markets.

Select high-performing markets across the top six cities have specifically seen upto 20 per cent YoY rental rise. This surge in rental prices reflects the growing preference of occupiers who are willing to pay a premium for buildings replete with state of the art and modern amenities, adorned with green certifications across strategic locations.

Owing to superior quality construction and high-end amenities, quoted rents of the new office supply are typically up to 20% higher compared to average rentals across select premium micro markets.

The report also highlights six priorities to achieve cost efficiency in office real estate such as align office strategy to business goals, portfolio strategy, maximise lease negotiations, data-driven space utilisation, prioritise energy efficient systems and upgrade and drive employee engagement and satisfaction.

“In response to evolving market dynamics, office occupiers in India are revolutionising their cost optimisation strategies, by embracing hub-and-spoke model, expanding flex space portfolios, and leveraging technology. Suburban and peripheral areas, offering affordability, are witnessing heightened demand, indicating a preference of sub-dollar or near-dollar markets. Flex spaces, especially with the rise of core-plus-flex models, are gaining prominence. At 8.7 million sqft of leasing in 2023 and highest ever space take up by flex spaces, the segment has witnessed remarkable expansion in recent years. Flex spaces are likely to continue the momentum in 2024, and is expected to constitute 15 per cent-20 per cent of total office leasing across the top 6 cities, underscoring occupiers’ pursuit of agile, cost-effective solutions to meet their evolving workspace needs.” said Arpit Mehrotra, Managing Director, Office services, India, Colliers.

India’s global capability centres offer a compelling value proposition for global corporates. With global corporates increasingly seeking to optimise resources, maximise savings, and drive growth, India offers a compelling proposition.  During Q1 2024, India continued to witness traction in GCC leasing activity.

A significant 5 million square feet (msf) of leasing activity by GCCs, represented 37 per cent of total office leasing across the top six cities. Looking ahead, GCCs are projected to lease between 45-50 msf of office space in the next two years, constituting around 40 per cent of total demand.

Heightened GCC activity is fuelled by diverse occupiers spanning sectors such as BFSI, technology, engineering and manufacturing, and healthcare. Additionally, there’s a persistent preference for green-certified Grade A office spaces. Sub and near dollar micro markets remain pivotal for GCC space uptake in India, contributing nearly 80% of the leasing activity in 2019-23.

“India’s ascent as a premier GCC hub in the APAC region underscores its unmatched value proposition for global corporates. In the next three years, the projected leasing of 45-50 million sqft of office space by GCCs is poised to further solidify India’s position, driving over 40 per cent of the country’s office leasing activity.  Fueled by a robust talent pool, strategic location, and a steadfast commitment to sustainability, India remains a beacon for diverse occupiers aiming to foster innovation and fuel growth.

Moreover, with over 150 msf of office supply at various stages of construction in the next three years, India continues to offer a plethora of high-quality office spaces at competitive prices, catering to the diverse needs of occupiers.”, said Vimal Nadar, Senior Director and Head of Research, Colliers India.

Is gift tax payable for the plot received and in case I am selling it to repatriate the sale proceeds, what is the procedure to transfer the funds to Gulf? Sheshu Babu, Sharjah.

Immovable property i.e. land or building or both, received as a gift, is taxable as income in the hands of the recipient.

However, there are certain circumstances under which a gift will not be subject to income tax. For instance if the value of the property as assessed for stamp duty does not exceed Rs50,000. In case you lease the land and earn rental income, it will be taxed.  The repatriation benefits are not available to land sale and restricted only to two residential units. You may construct a house on the land and then sell it as a unit which will become eligible for repatriation.

I invested in apartment when I was a resident in India and now in the Gulf. The property is 9 years old. Can I repatriate the sale proceeds of the property? Kindly clarify. Ricky Thomas, Dubai.

Yes. Remittance can be made even if such a property acquired out of rupee funds is sold after being held for less than ten years. However, you should ensure the sale proceeds were held for the balance period in NRO account or in any other eligible investment, provided such investment is traced to the sale proceeds of the immovable property.