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Indian Companies Finding it Difficult to Let Go of Office Spaces Despite Work from Home: Report

Image: Reuters

Image: Reuters

The commercial real estate sector is expected to report a sharp upswing in rent collection in the next financial year.

A new report by credit ratings agency India Ratings and Research has found that very few companies have given up office leases despite policies designed to work from home post pandemic.

“It appears that the lessees are still evaluating their long-term work-from-office policies. As office lessees have to incur substantial upfront fit out costs while moving into new premises, they are likely to be extremely cautious before cancelling any leases,” the report said.

As a result, the commercial real estate sector is expected to report a sharp upswing in rent collection in the next financial year. The report said resumption of work from office is likely to gain momentum as the vaccination programme advances over 2021.

Information technology and IT-enabled services sector companies, which account for about 40 per cent of office lessees in India, have started adopting innovative flexible/hybrid working options, hot desk policy, focusing on reducing floor space apart from permanent work from home.

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In residential real estate, the agency expects the sector to stage a sharp K-shaped recovery in the next financial year. The overall floor space sold is likely to increase by 30 per cent year-on-year in financial year 2022 after a 34 per cent year-on-year decline in the current financial year.

Additionally, with demand for larger apartments on the rise during the COVID-19 pandemic, the growth curve for studio apartments has hit a reverse gear for the first time in seven years with the supply declining by almost 15 percent, research by Anarock has revealed.

Of a total of 884 projects launched in 2020 across the top 7 cities, just 130 projects offered studio apartments – a 15 percent share, according to the research.

In contrast, of the 1,921 projects launched in 2019, around 368 or around 19 percent, offered studio apartments.

first published:March 12, 2021, 11:50 IST