Rentals lead Bombay comeback
Bombay's property market, which has been down in the dumps for the last two years, is showing signs of a comeback.
The first signs have been an improvement in the rental market for office space in the central business district (CBD) at Nariman Point, Cuffe Parade and Flora Fountain.
Rentals, which had fallen from their end-1994 peak by between 20 per cent and 25 per cent, and deposits, which had fallen from 50 per cent of capital value to a one-or two-year aggregation of rent, have bounced back.
In the absence of any major property deals, the South Bombay rental market has become an alternative for those in search of premium commercial or office space.
In particular, a number of foreign banks - like Sumitomo Bank, Chase Manhattan, Commerz Bank of Germany, Nations Bank of the United States, Bank of Indonesia and Toronto Dominion Bank - have been making a beeline for Nariman Point, where it is considered fashionable to own an office.
Each of these banks is looking for consolidated office space of more than 10,000 square feet, with well-maintained facilities and security.
Among the larger deals reported recently was one sealed by Commerz Bank, which took up 12,000 sq ft of space in Free Press House, at a rental of 300 rupees (about HK$66) per square foot per month.
The equivalent of four years' rent was paid as a security deposit.
Microsoft, of the US, which reportedly has big plans for India after the visit by its chief, Bill Gates, to India earlier this month, has taken up 1,735 sq ft in the same building at 275 rupees per sq ft per month, also with four years' rent as deposit.
New foreign corporate and financial institutions, like Jardine Matheson, prefer short-term leases of up to three years.
These provide flexibility in case of a business failure in India and avoid tying up funds in a chaotic property market.