The demand for affordable residential units may have witnessed an uptrend in the recent past, but commercial real estate refuses to show signs of revival.

"The demand in the residential sector may have picked up in the recent months but the same cannot be said of the commercial and office spaces," says Anuj Puri, chairman, Jones Lang LaSalle Meghraj.

Demand for office space relies largely on the IT sector, which is severely hit by recession in the US and Europe, he adds. The sector's business flow will depend on how quickly the global economy recovers. "Around 80 per cent of demand for office space comes from the IT sector."

Consider this: IT SEZs formed a majority of the notified tax-free enclaves. But, the economic slowdown and the concomitant credit crunch has forced many developers to seek de-notification of their SEZs, a majority of them meant for the IT sector.

In fact, the Board of Approvals (BoA) in the ministry of commerce is considering de-notification proposals of SEZs by DLF, Unitech, Ansals API, and Parsvnath, among others.

It's not SEZs alone. Even big commercial projects have proved to be damp squib. Country's largest developer DLF bagged the rights to develop the 34.6 acre-Dwarka convention centre, in Delhi, with a winning bid of Rs 901 crore. However, the project has not seen the light of the day as the developer does not want to divert funds towards its development, ostensibly because it has a long gestation period.

Similarly, Faridabad-based developer BPTP surrendered the much-hyped Rs 5,000 crore 95-acre plot in Noida to the Uttar Pradesh government, as it could not garner enough funds to pay for the plot.

Says Ramesh Menon, founder director, Certes Realty, a Gurgaon-based real estate consultancy firm, "Projects that have a long-gestation period and require huge investments will not be favoured by the developers at the moment." Menon argues that liquidity situation has been so grave for the developers that they want to start only those projects that have the potential to get returns immediately. "It's due to this reason that the low and mid-income residential projects are being launched."

A senior executive of Unitech, on conditions of anonymity, told FC Estate that though the company is raising around $325 million (Rs 1,560 crore) through QIP, yet the liquidity situation would improve only if end-users invest in the recently launched projects of the company. Unitech had to tweak its ultra-luxury project Grande, in Noida to attract mass buyers. The developer is now willing to sell plots in the 340 acre project, which was earlier, envisaged to have only luxury penthouses.

Source: mydigitalfc.com Little Bit Of Sunshine In Real Estate