Real estate due diligence can capture a slice of the 300 mn sq ft pie of the existing and upcoming commercial office buildings. The top 6 cities (Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, Pune) are seeing a strong pipeline of office buildings in the next 2-3 years, with about 180 mn sq ft of Grade A office stock in various stages of construction. At the same time, these top cities have Grade A office buildings of about 120 mn sq ft that can be refurbished, as per Colliers’ latest report ‘Technical Due Diligence: Risk-proofing Realty’.
As developers and investors venture into new geographies and asset classes, there is an increased demand for investigations into a real estate project across facets. Understanding associated risks and potential upsides of any prospective project has become pivotal to all stakeholders.
Developers and investors are seeking professional expertise to evaluate their upcoming projects and solutions for the upgradation of their existing ageing buildings.
The report showcases how Due Diligence can help various stakeholders take precautions to safeguard their investments. It ensures that a property is developed as per prescribed norms at a time when there is increased focus on aspects related to sustainability (ESG) and health and wellness. The assessment further provides a pathway to reduce uncertainties and maximize the potential profitability of a project.
“Investments in real estate are growing, with increased traction from global investors. In the last five years, foreign capital flows in real estate jumped 3 times to $24.0 bn, compared to the preceding five-year period. As the country is seeing a spurt in investments, there is an increased demand for state-of-the-art real estate projects which are technically and operationally compliant,” said Jatin Shah, Managing Director, Technical Due Diligence, Colliers India.
“The cost of conducting Due Diligence of a property is less than 0.3% of the project cost. As developers and investors venture into new geographies and asset classes, Due Diligence can help them risk-proof their prospective projects. The benefits will outweigh the costs incurred as it can save the stakeholder from substantial loss of money, time, and legal hassles,” he added.
For under-construction buildings, developers, investors and even occupiers can avail of Due Diligence services to get a better return on investments, timely risk mitigation and greater transparency during the transaction process.
The top six cities have about 120 mn sq ft of ageing Grade A stock, which is more than 15-year old. Due Diligence can help developers and landlords understand the scope of upgradation and achieve higher traction from occupiers, especially in the prime micro-markets of major cities. Due Diligence experts can provide developers and investors with recommendations to overhaul their older properties. Upgrading old office buildings will help in gaining more traction from occupiers, increase the value of the building with increased building longevity.
“Post-Covid-19 developers and investors have become more cognizant about the efficiency of the project. It has become pivotal for them to understand the associated risks and upsides of any prospective project. Stakeholders can risk-proof their projects by making a small investment in Due Diligence and maximize their returns on investments,” said Vimal Nadar, Senior Director, Research, Colliers India.